CHAN YUK LUN C laimant (陳鈺麟) and PARAGON REALTY LIMITED Defendant (中怡物業有限公司)

HCLA12/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 12 OF 2009

(ON APPEAL FROM LBTC NO. 4217 OF 2007)

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BETWEEN

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J U D G M E N T

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Background facts

1.  The claimant-appellant was employed by the defendant-respondent on 17 January 2007. His position was Senior Property Consultant and he was responsible for finding potential buyers for the real properties listed in the respondent’s stock. Like other property agents, commission formed the majority of the appellant’s income.

2.  The appellant concluded two property sales transactions in the course of his employment with the respondent. After the first transaction his commission was duly given together with the “target bonuses”. The second transaction was concluded on 11 July 2007 (“the July transaction”) but the appellant did not get the amount he expected for commission and bonuses. The appellant received commissions for three other rental transactions.

3.  The appellant was dismissed on the 4 August 2007. The appellant claimed for commission, wages in arrear and other unpaid items. The appellant and the representative of the respondent company, Ms Tse Yuen Ming gave two wholly different accounts as to the reason for the dismissal. It is useful to summarise their accounts in the Labour Tribunal and this court now.

The appellant’s evidence

4.  The appellant maintained that he was entitled to have $297,500 as commission for the July transaction. His argument was simply that he had exercised his duty faithfully in concluding the deal. He said he did not work with Ms Tse as “partners” and so he should not have his commission shared with Ms Tse. On 4 August 2007 he was asked to sign a dismissal notice by Ms Tse but he refused. His main reason was that the dismissal notice purported to allow the respondent company to withhold 30% of his unpaid commission of the July transaction as “administrative fee”. He also alleged that Ms Tse had hit him on the chest when he was returning the notice to her unsigned. This is relevant to certain adjournments in the Tribunal below.

5.  The appellant also argued that he was entitled to “target bonus” under the scheme proposed by the former manager, Mr Wong. The scheme was setup with the intention of “achieving excellent results in the first half of 2007” and it expressly provided that the effective period is within 1 January 2007 to 30 June 2007. The appellant thought that the same scheme should run to the second half of the year and that there was no evidence that such a scheme had been terminated.

Ms Tse’s evidence for the respondent

6.  Her evidence revolved around the calculation of the commission. She said that the seller in the July transaction was dissatisfied by the appellant’s service and had only agreed to pay $140,400 for the commission of the transaction. Accordingly, the appellant was only entitled to some $60,000 out of the $140,400 commission paid to the respondent company. She was able to produce a copy of the cheque, filed as D37, as proof of the amount of commission received from the seller. She did not pursue this line of argument after the seller in the July transaction testified that he had paid $400,000 as commission for the sale. In fact the seller specifically denied having issued this cheque (Exhibit D37) at all. Subsequently Ms Tse conceded that the respondent company had received $800,000 as commission from both the seller and buyer for the July transaction.

7.  She also advanced arguments to the effect that she was either a partner of the appellant or acted as agent for the seller in the July transaction. For this reason she said she was entitled to a portion of the appellant’s commission.

The decision in the Labour Tribunal

8.  The Presiding Officer Mr George Own allowed the appellant’s claim in wages in lieu of notice, commission, annual leave pay and some miscellaneous items. The amount for commission was increased to $297,500 upon review from the first instance judgment of $208,250. The claim for year end bonus, “target bonus” and other miscellaneous items was dismissed. He made no order to cost.

The proceeding before this court

9.  The appellant appeals against the judgment on his claim for the bonuses, the miscellaneous items and cost. I will deal with each ground of appeal separately.

The year end bonus

10.  Was there a year end bonus? The employment contract on 17 January2007 has the following term :

“Chinese New Year Bonus (‘CNY Bonus’)

Please note that staffs earning commission as part of their package are not entitled to the CNY bonus.  You will only be awarded a year end bonus/gratuity should the Directors deem it appropriate and profits permit it.”

11.  The primary issue is whether the appellant is entitled to any year end bonus in the first place. The first sentence of this term clearly negativate any intention of giving a year end bonus to the appellant. There was no dispute that the appellant was earning commission, in fact that part of his income was the main focus of the arguments in the Labour Tribunal. No other terms in the contract mentions anything about a year end bonus and I am satisfied that the appellant is not entitled to any year end bonus.

12.  Even if I am wrong on this finding, the result will be the same. No term can be clearer to evince an intention to the contrary for the purpose of applying s11AA of EO. The second sentence clearly provides that the condition for issuing the Chinese New Year bonus is contingent on the consent of the directors and profits. Clearly the employer had reserved its right not to issue any bonus at all and I do not think that the respondent had undertaken to pay bonus every year as part of their obligations to its employees.

13.  The appellant had argued that the Employment (Amendment) Ordinance 2007 could affect his position. He relied on the failure of his employers to update the terms before and after the enactment of the law. In my opinion, the 2007 Ordinance does not affect the appellant’s position under this head.

14.  Accordingly, I would dismiss this part of the appeal.

Target bonus

15.  The bonus scheme was allegedly proposed by Mr Wong Fu Kit, the then manager on 29 December 2006. The scheme provided a tiered reward system for property agents to claim rewards for achieving a specific target within a prescribed timeframe. There was undisputed evidence that the appellant had been rewarded under the scheme for an earlier transaction before. The issue before the Labour Tribunal and this court is whether he should be awarded for the July transaction under the scheme.

16.  The appellant sought to argue that the scheme had either been extended by half a year or a similar scheme of the same nature was implemented in July for an unknown period. I am satisfied that neither of these assertions is true.

17.  The appellant relied on the dismissal notice served on 4 August 2007 for the proposition that the scheme was still in place when he concluded the July transaction. The dismissal notice purported to assure him of the right to claim any bonus in arrear. But it says no more than this : “You can still claim the bonus in arrear after the dismissal.” If the said scheme was still in place in the second half of 2007, then the appellant would be entitled to the bonus and the dismissal notice would guarantee his right to this bonus. If, as I am inclined to think this is the case, the scheme had ceased to operate after 30 June 2007 then the part on bonus in arrear in the dismissal notice would have no effect.

18.  The appellant also submitted that by way of implication the scheme would continue to operate in the second half of the year under the same term. I doubt whether this is true. If it had been the intention of the respondent to implement the scheme for a whole year, why was the ending date fixed on 30 June 2007 but not 31 December 2007? The awards were given for achieving a definite target within either 10 days or a month, so it seems that Mr Wong could have easily fixed the ending date on 31 December 2007 in the first place, if that was the original intention. In fact, if that was the original intention, a single scheme that runs for a period of 12 months would be superior to two schemes each running for a period of 6 months (as alleged by the appellant). This is because an anomaly would arise if an agent were to meet the 10-day target with a transaction on 29 June 2007 and another transaction on 2 July 2007. Is the agent entitled to the 10-day target bonus in this case? If the ending date was intended to be 31 December 2007, why would Mr Wong adopt an approach (initial period of 6 months followed by an automatic renewal, as alleged by the appellant) that is problematic and has no benefits?

19.  For the reasoning above, I am of the view that the designer of this scheme, Mr Wong had reserved the right not to implement the scheme in the second half of the year. Therefore, there was no automatic renewal as alleged by the appellant. Because there was no automatic renewal and since Mr Wong had left the company before June he was unable to renew the scheme. The person who could extend the scheme to the next half of the year, Ms Tse, had never professed an intention to continue with the scheme. Therefore as much as I can understand why the appellant would want to assert that the scheme was still in place in July, there was simply nothing that could support this assertion.

20.  Accordingly the scheme did not operate beyond 30 June 2007 and the appellant was not entitled to any bonus for the July transaction. I would dismiss this part of the appeal.

The miscellaneous items

21.  This part is of a relatively small amount of money when compared with the overall claim. Although the appellant expressed that he would not pursue this part vigorously he had nevertheless offered some explanation to the events that led to the following charges. I will deal with each charge separately.

Parking fees and vehicle-unlocking fees

22.  These claims concern the charges incurred when the appellants was driving to perform his duty of taking prospective buyers to see the property. In deciding this part of the claim, the starting point is whether the appellant could have the charges reimbursed as agent to the respondent.

23.  It has repeatedly been said that an agent has an indemnity from the principal for expenses incurred reasonably for the benefit of the principal (China-Pacific SA v Food Corpn of India, The Winson [1982] AC 939). In the appellant’s submission the parking fee was incurred when he parked at a hotel for the purpose of delivering a list of furniture and some documents relating to the July transaction. It might well be the obligation of the appellant to help deliver some documents to bring about the final conveyance of the property and the payment of commission. I am satisfied that the parking fee was incurred for the benefit of the respondent company.

24.  The vehicle-unlocking fee was incurred when he was waiting for a client’s staff to put something into the appellant’s vehicle. The fee was reasonably incurred as it was necessary for the appellant to move certain items as part of the follow-up work. I do not think that the appellant was contractually obliged to help with the follow-up work but it was necessary in the sense of maintaining good business relationship. Therefore I hold that it was reasonably incurred for the benefit of the respondent company.

25.  The last question is whether allowing this part of the claim would have the undesired effect of “encouraging an employee to park his/her vehicle without observing the law”, as the Presiding Officer had said in the Labour Tribunal. I do not think that the strong language in this statement fits the current situation. The appellant had not done an act so grave that a reimbursement for the consequential liability would be against the public policy. It would not have any encouragement effect as most employers would warn their employees to avoid this charge on the company’s account in the future.

26.  The appellant submitted that it was customary for the respondent to reimburse him for expenditures arising out of any transaction resulting in over $60,000 revenue to the respondent. I am not sure whether the issue of reimbursement had been thoroughly discussed between the appellant and the respondent, so I will not consider this point. In any event I am satisfied that by applying the general agency principles that an agent is entitled to look toward his principal for reimbursement reasonably incurred the appellant is entitled to succeed on these claims.

Inspection fee for door locks

27.  I now turn to the last item, which is the inspection fee for door locks in the property of the July transaction. Fees of this kind are usually paid by the parties to the property transaction, not the property agent. The only reason why the appellant agreed be jointly and severally liable for those fees by saying : “If the seller does not pay, I will pay” was that he wanted to be rewarded by Princeton Interiors Ltd for bringing businesses to it. I am satisfied that the principal is not obliged to reimburse him. I would dismiss this part of the appeal.

Cost in the Labour Tribunal

28.  The Labour Tribunal gave no order as to cost because the Presiding Officer thought the appellant was partly responsible for the lengthy proceeding as he asked numerous questions that were not relevant to the proceedings. That could not be a reason for depriving the appellant of costs totally. In fact I am mindful of the many misleading evidence given by Ms Tse, in particular the cheque that was allegedly given by the seller in the July transaction. She must have known that the commission from the seller regarding the July transaction had already been paid. There was no explanation from Ms Tse for the cheque in Exhibit D37 which the seller had said that they had never issued that cheque at all. It is very surprising that the Presiding Officer did not take any further action against Ms Tse.

29.  Further many of the adjournments were caused by the sickness of the appellant. This was related to the injury he suffered as a result of Ms Tse pushing him out of the office. On the other hand, some of the adjournments were caused by Ms Tse herself.

30.  For the aforesaid reasons, I would accordingly award cost to the appellant.

Variation of the order below

31.  The appellant’s income during his employment for 200 days from 17 January 2007 to 4 August 2007 was as follows :

Items :	Amount (HK$)
Basic Salary
—   January (15 out of 31 days)	2,903.23
—   February to July	36,000
—   August (4 out of 31 days)	967.74
Commission (see p. 004 of the bundle)	187,500+297,500+2,250+4,200+4,800 = 496,250
Target Bonus	7,000
Total	543,120.97

32.  In light of the amended amount of commission in item B, items A and C should be adjusted by the Presiding Officer as follows :

A)  Wages in lieu of notice = $81,468.15;

B)  Commission = $297, 500.00;

C)  Annual Leave Pay for 3.836 days (7 days x 200 / 365) = $10,417.06;

J)  Miscellaneous Items = $420 ($50+$50+$320)

     Total (A + B + C + J) = $389,805.00.

Conclusion

33.  I would allow the appeal and set aside the orders of the Presiding Officer. There shall be judgment for the appellant in the sum of $389,805. There shall also be costs in the appeal and in the Tribunal below, to be taxed if not agreed.

Epilogue

34.  There are 2 things I would like to deal with here. In the first place, Ms Tse just walked out of the court room in the Tribunal below when the appellant was about to make his submission. The Presiding Officer, strangely enough, decided that in that event, the appellant could not use his own written submission. In fact, Ms Tse should be taken as having given up her right to address the court. Thus, Mr Chan should not be “penalised” by not being allowed to put in his written submission.

35.  Secondly, since the seller clearly said under oath that they had never issued that cheque which was produced by Ms Tse, this matter should be referred to the Department of Justice for consideration of further possible action to be taken against Ms Tse.