DANDAN ZHANG v. QUORUM ASSOCIATES LTD

HCA3655/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.3655 OF 2002

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J U D G M E N T

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1. The plaintiff claims against the defendant, being her employer, the following :

(a)	arrears of salary for the period November 2001 to May 2002 in the amount of US$61,666.65 (equivalent to HK$481,000.00);
(b)	fees split owed to her in the amount of US$7,875.00 (equivalent to HK$61,425.00); and
(c)	expense reimbursements owed to her for the period between 4 December 2001 to 31 May 2002 in the amount of HK$11,533.90.

2. The claim was originally brought by the plaintiff in the Labour Tribunal.  Upon the application of the defendant, the Tribunal Officer ordered that this matter be transferred to be dealt with in the High Court.

Background

3. The plaintiff has since 1997 been involved with the Retainer Executive Search business, commonly called ‘headhunting’.  Since early 1997, the plaintiff has worked her way up from a researcher to being a director of executive search at A.T. Kearney, one of the larger global retainer executive search firm.

4. Quorum Associates LLC (‘Quorum LLC’) is an executive search company registered in New York, USA.

5. The defendant was a shelf company incorporated in Hong Kong.  It was acquired by Quorum LLC on 8 December 2000 and thereafter a wholly owned subsidiary of Quorum LLC.  On 18 December, the four partners of Quorum LLC, being also its directors, were registered as the directors on the Board of Directors of the defendant.

6. During October 2000, before the defendant became a wholly owned subsidiary of Quorum LLC, negotiations took place between the plaintiff and Quorum LLC, with a view to Quorum LLC employing the plaintiff.  Ultimately, on 1 November 2000 a letter of employment was signed between the plaintiff and Quorum LLC, whereby the plaintiff became the employee of Quorum LLC upon the terms stated therein (“the letter of employment”).

7. Shortly after the defendant was acquired by and became the wholly owned subsidiary of Quorum LLC, the plaintiff was given the title of Managing Director of the defendant and given the authority to head its operation in Hong Kong.  It was only a title given to her as it is common ground that she did not sit on the Board of Directors of the defendant.

8. During the year 2001, a new compensation plan was introduced by Quorum LLC in respect of all its employees worldwide.  Up to 1 November 2001, the plaintiff was not included in the new compensation plan introduced by Quorum LLC.

9. On 1 November 2001, a discussion took place between Mr Benjamin Rauch, one of the partners of Quorum LLC, and the plaintiff as to the new compensation plan at a breakfast meeting in the Mandarin Hotel in Central.

10. For the months of November and December 2001, the plaintiff was not paid her monthly salary of US$10,833.33 as provided for in the employment letter but was paid a monthly salary of US$4,583.33 which was in accordance with the new compensation plan introduced by Quorum LLC.  For the month of January 2002, the plaintiff was paid a consultancy fee of US$5,000.00.  After January 2002 the plaintiff did not receive any salary or any other form of remuneration from the defendant at all.

The plaintiff's case

11. It is the plaintiff’s case that firstly, there was an understanding between her and Quorum LLC when she signed the letter of employment thereby joining Quorum LLC that when the Hong Kong company was set up by Quorum LLC in Hong Kong, her employment would be transferred to the Hong Kong company and she would head the Hong Kong company.

12. Secondly, when she was given the title of Managing Director of the defendant at a meeting of the partners and directors of Quorum LLC on 21 December 2000, she was informed by them after their meeting that her employment with Quorum LLC was transferred to the defendant and that she was to head the defendant company in her new employment with it.

13. She was congratulated by all the partners after that decision was taken by them as to such change.  When she later spoke to Francis Goldwyn, another partner of Quorum LLC, enquiring whether there should be a new employment letter with the defendant she was told by Goldwyn that it would not be necessary since the defendant was a wholly owned subsidiary of Quorum LLC.  She was also told by Goldwyn that new business cards would be printed for her to show her new position as Managing Director of the defendant.  That, she understood, was the title given to her but she did not sit on the Board of Directors of the defendant, rather the same directors who were the partners of Quorum LLC sat on the Board of Directors of the defendant.

14. It is also the plaintiff’s case that her employment with the defendant after it was transferred by agreement from Quorum LLC upon the same terms of the employment letter entered into with Quorum LLC continued without any termination since she had never been given 30 days’ notice of termination as required in the letter of employment.

15. At the breakfast meeting on 1 November 2001, Rauch had discussed with her the new compensation plan which had already been made effective for all the staff of Quorum LLC.  She had understood the workings of the new compensation plan but had not agreed to accept it at the meeting on 1 November 2001.  They were in the course of negotiating a new salary package for the plaintiff.  She was not given 30 days’ notice of termination of her employment by Rauch at the 1 November meeting or by anyone from the defendant at any time.

16. When she received only US$4,583.33 for the months of November and December 2001, she had complained to Rauch about it but was told that it was subject to the agreement between them as to the new salary terms for her.

17. It is also the plaintiff’s case that she had at no time agreed to a consultancy fee of US$5,000.00 for January 2002 but that was paid to her by her employers unilaterally.

18. She had continued to work for the defendant throughout the time and she had never, even to the present, been given 30 days’ notice of termination by the defendant.  Her claim for arrears of salary was only up to the end of May 2002 since her claim in the Labour Tribunal was lodged in early June 2002.  There is no subsequent claim by the plaintiff for the period after May 2002.

19. The claim for split fees arise from a placement in relation to Fidelity Ventures Ltd (“Fidelity”).  That was a mandate given to the plaintiff by Fidelity in the year 2000 and which followed the plaintiff after she took up employment with Quorum LLC and later, when she headed the defendant.  However, a temporary stop was put on this project by Fidelity in April 2001 due to Fidelity’s internal re-organisation.  However the project was revived in August 2001 and was finally concluded when Benson Tam signed an employment contract with Fidelity in early February 2002.  The fees for this assignment was paid by Fidelity to Quorum LLC on two separate occasions.  The initial retainer fee of US$11,500.00 was paid in November 2001.  The final payment of US$20,000.00 was paid by Fidelity to Quorum LLC at the end of March 2002.  There is no dispute that such fees were received by Quorum LLC.

20. The plaintiff’s claim is for 25% of those fees as she is entitled under the fees split terms as contained in her employment letter with Quorum LLC.

21. The last item of claim being for reimbursement of expenses arise from the fact that in Hong Kong the plaintiff has at all times paid for the expenses of the defendant out of her own pocket and then sought reimbursement of same from Quorum LLC, being the parent company of the defendant and funding all of the defendant’s expenses.

The defence case

22. The defence case is that the plaintiff was at all times employed by Quorum LLC and at no time had this employment been transferred to the defendant, either by agreement as alleged by the plaintiff or in any other way.

23. In line with this, it is also alleged by the defendant that the defendant was formed only for the purpose of accounting or administrative convenience and that the defendant was never an operational entity.  At all times therefore the plaintiff was employed by and working for Quorum LLC.

24. When the plaintiff’s title was changed from that of a principal of Quorum LLC to that of Marketing Director of the defendant, it was for administrative convenience because certain of their clients in Hong Kong preferred to be invoiced by a Hong Kong company rather than an overseas company such as Quorum LLC, and that the enhanced title given to the plaintiff was to give face to clients whom she dealt with.

25. The defendant relies on the fact that it has no permanent office in Hong Kong and has not even a bank account itself, but that all the fees invoiced by the defendant is paid into Quorum LLC’s bank account.

26. Secondly, the defence allege that the plaintiff’s employment under the terms of the employment letter signed with Quorum LLC was terminated at the breakfast meeting on 1 November 2001 with immediate effect when the plaintiff was informed by Rauch of the new compensation plan.  Thereafter the plaintiff was no longer entitled to claim for the monthly salary of US$10,833.33 (or the balance of it) for the months of November and December 2001.

27. As for January 2002, it is alleged that there was an oral agreement between them that the plaintiff would finish off her work with Quorum LLC for that month as a consultant at the agreed consultancy fee of US$5,000.00.

28. After January 2002, the plaintiff was no longer employed by Quorum LLC and did no work for the defendant therefore she was not entitled to any salary or fees since she had already been paid all that was due to her.

29. As for the split fees claimed by the plaintiff, the defence is that although the original mandate for placement was given to the plaintiff by Fidelity, that project was put a stop to by Fidelity in April 2001.  What was re-started in August 2001 was not a revival or continuation of the same project as alleged by the plaintiff, but an altogether different and much larger project that was given by Fidelity to Quorum LLC which involved a global search rather than being limited to the Asia region.  This project concluded with the signing by Benson Tam of an employment contract with Fidelity in February 2002.  Therefore the fees received by Quorum LLC of US$11,500.00 and US$20,000.00 did not arise from the original mandate given to the plaintiff by Fidelity and the plaintiff is not entitled to any split of such fees.

30. As for the claim for expense reimbursement, the defence is simply that the plaintiff was not entitled to make such claim since her employment ended on 1 November 2001.

Issues for determination

31. From the differences in the case for the plaintiff and that of the defence, it can be seen that the following issues need to be resolved and determined in this judgment :

(a)	who was the employer of the plaintiff at the material time of what was claimed by the plaintiff;
(b)	had the plaintiff’s employment been effectively terminated before May 2002, and if so when;
(c)	was the plaintiff entitled to a 25% share of theUS$11,500.00 and US$20,000.00 fees received from Fidelity pursuant to the terms of her employment letter; and
(d)	was the plaintiff entitled to claim the expense reimbursements claimed by her.

32. Since the evidence relating to these four issues are different, it would be easier for me to deal with each of the four issues in turn and make findings in respect of each issue in order to come to a determination regarding the dispute between the parties in this case.

Who was the employer

33. The starting point must of course be the letter of employment signed between the plaintiff and Quorum LLC.

34. Since it is common ground that the terms of employment as contained in the letter of employment were the applicable terms relating to the plaintiff’s employment (whether or not there was a change in the identity of the employer from Quorum LLC to the defendant), I should set out in full the terms as was originally agreed between the plaintiff and Quorum LLC as contained in the employment letter typed on Quorum LLC’s letterhead :

“Benjamin B. Rauch

Managing Partner

October 23, 2000

(Revised October 30, 2000)

PERSONAL AND CONFIDENTIAL

Ms. Dandan Zhang

1A, Block 22, La Costa

Discovery Bay

Hong Kong

Dear Dandan,

Confirming our recent conversations, I am pleased to provide you with the following offer of employment.

This offer recognizes that you have obtained from Fidelity Ventures three mandates.  Fidelity Ventures is prepared to have you execute them at Quorum Associates, providing two provisions are met

1.	That you finalize employment details with Quorum; and
2.	That I have a satisfactory conversation with your client, Daniel Auerbach, after we have finalized your terms of employment.
This letter is intended to meet condition 1.
1)	You will be employed as a Principal by Quorum Associates, LLC.
2)	You will be based initially in Hong Kong with secretarial support provided to you at your home and at Eban’s offices, as decided; subsequently, you will be based in Toronto with support provided to you at your home (subsequently will be determined by you and us, and dependent upon when your required Canadian immigration paperwork comes through).
3)	You will be paid a total of US$130,000 per annum (monthly $10,833.33 in arrears) including base salary and rent reimbursement.
4)	You will be paid a minimum guaranteed bonus of $15,000 per annum, $7,500 payable 1/1/01 and $7,500 payable 4/1/01.
5)	Hereafter, you will receive (a) 25% of the revenue of the business you originate, payable upon receipt of funds from the client, and (b) a discretionary bonus payable biannually based on other quantitative and subjective measures of performance.
6)	You will be eligible for this benefits provided under our health and other insurance plans (details to be provided).
7)	You will be entitled to annual leave of 20 working days.
8)	You will start work as soon as possible.
9)	Notice period is 30 days.
10)	Should you be made redundant without cause in the first 12 months of employment with Quorum, you will receive the equivalent of three months’ salary.

Dandan, we all look forward to your joining Quorum and to the value we know you will add to the firm.

If you have any questions, pelase call me.

Yours sincerely,

Signed

Benjamin B. Rauch

cc:	J.H. Barnes
	M.T. Brookes
	F. Goldwyn

AGREED AND ACCEPTED

Signed	1-Nov-2000
____________	____________
Dandan Zhang	Date

Ben:

       I’m excited to join Quorum & will start today,
1-Nov-2000.”

35. It is the plaintiff’s evidence that at a Board Meeting of the directors of Quorum LLC (being the same directors as the defendant) the decision was taken to transfer her employment with Quorum LLC to that of the defendant and at the same meeting it was also decided that her title be changed from a Principal with Quorum LLC to that of Managing Director of the defendant.  That board meeting took place on 21 December 2000, after the defendant had been established and acquired by Quorum LLC as its wholly owned subsidiary.  She came to know of that decision because after the meeting she was congratulated by all the partners (being also the directors) of Quorum LLC.  When she later spoke to Goldwyn as to the new documentation for the change of employment from Quorum LLC to the defendant, she was assured by Goldwyn that the further documentation was not necessary since the defendant was a wholly owned subsidiary of Quorum LLC.

36. Apart from this evidence from the plaintiff of the oral agreement between them to transfer her employment from Quorum LLC to the defendant, the plaintiff also relies on the Employer’s Return (Form IR 56B) for the year ended 31 March 2001 to the Inland Revenue Department in Hong Kong signed by Francis Goldwyn in which it was stated that the plaintiff was employed by the defendant from 1 November 2000 to 31 March 2001.

37. Having heard all the evidence in this case and viewed the documentary evidence produced, I found the plaintiff to be a thoroughly honest and truthful witness.  Despite a long and searching cross-examination she was not the least dented in the evidence that she gave but was always consistent in maintaining that evidence.  I have no difficulty accepting all that she said to be true.

38. From her evidence I find that there was an understanding between the parties even before the letter of employment was entered into by them that when the Hong Kong subsidiary of Quorum LLC was set up the plaintiff be employed by the Hong Kong subsidiary to head its operation.  I have no doubt that it was this promised which sufficiently attracted the plaintiff to give up her former job to join Quorum LLC.

39. I further accept the plaintiff’s evidence that at a meeting of the partners of Quorum LLC on 21 December 2000, a decision was taken to transfer her employment to the defendant (to which the plaintiff later agreed when informed of such decision) and for the plaintiff to head the defendant’s operations in Hong Kong with the new title of Managing Director, albeit that she was not made a director of the Board of the defendant.

40. I also accept her evidence that when she later enquired with Goldwyn as to an update contract of employment with the defendant, she was told by him that it would not be necessary since the defendant was a wholly owned subsidiary of Quorum LLC.

41. The above finding is not inconsistent with what was stated in the Employer’s Return signed by Francis Goldwyn and which was back-dated to 2001 albeit that it was lodged with the Inland Revenue Department some time in February 2002.  I say that it is not inconsistent with the  Employer’s Return because section 52(3) of the Inland Revenue Ordinance provides that a person engaged in the management of a company is deemed to be employed by that company.  In the present case, there can be no doubt that the plaintiff was, almost single handedly involved in the management of the defendant at all times after the defendant was acquired by Quorum LLC as its wholly owned subsidiary.  It follows therefore, and because of the deeming provision in section 52(3), I am unable to attach weight to the Employer’s Return as evidence that she was de facto employed by the defendant.

42. Although I could not attach weight to the Employer’s Return, that in no way detracted from my acceptance of the plaintiff’s evidence on this issue.

43. Another good reason why the letter of employment was entered into with Quorum LLC was due to the fact that at that time the defendant had not yet been acquired by Quorum LLC and therefore could not have entered into any binding contract of employment with the plaintiff at the time when the letter of employment was signed.

44. I should also make it clear that in coming to this finding, I attached no weight to the evidence of the three witnesses called by the plaintiff to the effect that they were under the impression (from the plaintiff’s title as Managing Director of the defendant in her business card) that she was employed by the defendant.  Their impression in that respect is neither here nor there since this is not a case of holding out.

45. One piece of evidence which I did take note of and which indicated to me that the evidence given by the plaintiff in this regard to be true and reliable is contained in an email from the plaintiff to Benjamin Rauch dated 28 December 2000, at a time long before any dispute arose between them, but shortly after the board meeting of the partners and directors of Quorum LLC.  In paragraph 1 of that email the plaintiff asks Rauch whether she will be receiving new name cards and whether the new name cards will have her new title officially approved to Managing Director.  In paragraph 2 of that email, the plaintiff asks for the current status of the registration of the Hong Kong company (the defendant) since that has an “impact on my legitimacy in conducting/pitching search in Hong Kong”.  That same paragraph goes on to remind Rauch that if the company is registered, it is required by law to set up an MPF (mandatory provident fund) scheme.

46. Section 7 of the Mandatory Provident Fund Schemes Ordinance, Cap. 485 imposes upon an employer the duty to take all practical steps to ensure that the employees becomes a member of a registered scheme with the permitted period prescribed by the Ordinance when it came into force.  An “employer” is defined in section 2 of that Ordinance as any person who has entered into a contract of employment to employ another person as his employee.

47. The email from the plaintiff to Rauch shows that even on 28 December 2000, the plaintiff regarded herself as under a contract of employment with the defendant, being the company registered in Hong Kong.

48. From the above, I accept the plaintiff’s evidence and find that the plaintiff was employed by the defendant although the initial letter of employment was entered into with Quorum LLC on the basis that there was a subsequent oral agreement on or about 21 December 2000 whereby the plaintiff agreed with the partners of Quorum LLC (being also the directors of the defendant) to transfer her employment with Quorum LLC to that of the defendant.

49. It follows from my findings above that I reject the evidence given by Rauch and Goldwyn for the defendant.  The reasons for my rejection of their evidence will become clear in the latter part of this judgment when I deal with the issue of termination of employment.

50. Moreover, my rejection of their evidence is not limited only to this issue but runs throughout the entire case such that I am able to say with no uncertainty that where the evidence of the plaintiff conflicts with that given by Rauch and/or Goldwyn, I prefer the plaintiff’s evidence.

Whether plaintiff’s employment was terminated

51. It is the plaintiff’s case that her employment with the defendant was never properly terminated in accordance with the terms of the letter of employment.

52. It is the defendant’s case that the plaintiff’s employment was terminated.  It is interesting to note at once that on various occasions, the defendant have sought to allege that the plaintiff’s employment was terminated at different times and in different manners as follows :

(a)	that the contract of employment expired naturally at the end of the 1st year i.e. by the 1 November 2001;
(b)	that 30 days’ oral notice of termination was given to the plaintiff by Rauch at their breakfast meeting on 1 November 2001 and that such 30 days’ notice expired by the end of November 2001;
(c)	that the plaintiff herself resigned from her employment on 28 December 2001 which resignation was accepted by the defendant;
(d)	Quorum LLC had the right to unilaterally start the new compensation plan on the plaintiff as from 1 November 2001 due to her non-performance;
(e)	the plaintiff had resigned from Quorum LLC on 1 November 2001 and thereafter started a consulting relationship between them; and
(f)	the plaintiff had agreed on 1 November with Quorum LLC to continue being employed at a reduced salary of US$55,000.00 per year (i.e. with the new compensation plan).

53. I shall deal with the factual dispute relating to these allegations raised by the defendant.

54. The 1^st allegation that the contract of employment expired at the end of the first year.  This allegation was first made in Rauch’s email to the plaintiff dated 30 November 2001 which states:

“You will receive payment in the amount of $4,583.33 in your bank account tomorrow.  This represents $55,000 divided by 12 months.  This is not to say we have agreed this, it is to say it is the monthly salary you would be paid on the basis of your production under the comp plan, as your employment letter expired Nov 1.  We will adjust the amount paid to you on the basis of what we do agree.

I am in receipt of your forecast and will review this with Fran when he returns.  The outcome of this review will determine our base salary for you, and you and we will then proceed accordingly.”

55. This resulted in a reply from the plaintiff to Rauch by email also dated 30 November 2001 which states :

“I am sure this is a mix-up.  I found the employment letter.  It does not have an expiration date.”

56. Rauch then sent another email to the plaintiff dated 1 December 2001 which states :

“I don’t think there is a mixup.  After one year, we are revisiting your terms and conditions on the basis of your performance for the first year.  Your letter says should you be made redundant without cause in the first 12 months, you are entitled to three months’ salary.  After that you are not.  Notice period is 30 days.

At breakfast on Nov. 1 I told you, and you acknowledged, we were reviewing you and were we to continue, you would be on the same comp plan as everyone else.  On the basis of that comp plan and your production to date, you would receive a base salary of $55,000.  You understood this calculation. I am not saying you agreed with it.  You have come back with $85,000 plus $15,000 for your home office.  We have agreed to take the home office ‘off the table’ and are dealing with the $30,000 difference.  You have sent us numbers to justify this difference and Fran and I will review them with you next week.  In the meantime, I have paid you for Nov., when the new plan took effect, on the basis of the plan.  I have also explained we will adjust you on the basis of the outcome of our review with you.”

57. This drew a further response from the plaintiff by email dated 3 December 2001 to Rauch which states :

“I am glad we agree that there is no expiration date on the employment letter and the notice period is 30 days.  To date, we have neither agreed on the amount nor the starting date for the new compensation plan, although when and if we agree on the amount after our further discussion, it is possible that we also agree to back date the starting date.

I hope we continue the discussion in a professional manner.  As a friend, please rest assured that I have been doing and will do everything I can to help protect your interests.”

58. In so far as it is alleged by the defendant that employment contract as per the terms of the employment letter expired on 1 November (2001), that is quite wrong since there is neither any expiration date nor any expiration clause in the letter of employment except for the notice of termination being agreed to be 30 days.

59. All that can be said is that clause 10 provides that if the plaintiff was made redundant without cause in her first year of service, the defendant would have to pay her redundancy payment equivalent to three months’ salary.  That however, does not mean that the contract of employment expires on 1 November 2001.

60. That allegation of the defendant that the contract of employment expired by 1 November 2001 cannot be sustained.

61. The 2^nd allegation by the defendant that the plaintiff was given 30 days’ notice of termination by Rauch at their breakfast meeting on 1 November 2001 is factually disputed by the plaintiff who says that no such notice had ever been given to her.

62. From the contents of the emails passing between the plaintiff and Rauch as quoted above, I have no hesitation whatsoever in accepting that evidence of the plaintiff and rejecting the evidence of Rauch that 30 days’ notice of termination had been given to the plaintiff on 1 November by him.

63. The 3^rd allegation made by the defendant was that the plaintiff resigned from her employment on 28 December 2001.  In making this allegation, the defendant relies on an email from the plaintiff to Rauch dated 28 December which states which was in reply to an email from Rauch to the plaintiff dated 27 December 2001.  For the sake of completeness, I reproduce both these emails, the first from Rauch to the plaintiff dated 27 December states :

“The purpose of our call tomorrow was to review with you how Fran and I got through your budget to arrive at your having, effectively, a 100% chance of doing $185,000 in business, which equates to a base of $65,000.

If your ‘bottom line’ is $85,000, then there isn’t much point in having the call, is there?”

64. To which the plaintiff replied to Rauch by email dated 28 December 2001 stating as follows :

“You are right about the call, now that I know 65K is what you have in mind.

Please understand that this is strictly a business decision on my side, i.e., there are absolutely no bad feelings towards you or Quorum from my side.  I tried very hard to justify coming up with the 85 + 15K number, given my market value here either from going with another firm or doing it on my own.  I will keep honouring our existing contract and do my best in making the transition as smooth as possible in the eyes of our clients.  Meanwhile, I hope to keep in touch with you as friends.”

65. On reading this email from the plaintiff to Rauch dated 28 December, it is clear to me reading it as a whole that it does not support the defendant’s allegation that the plaintiff resigned from her office.  That interpretation by the defendant focusing on the words “from going with another firm or doing it on my own” is taken quite out of context.  When the entirety of the email is read, it can readily be seen that those words relied on by the defendant to say that the plaintiff resigned, were referring to what the plaintiff considered to be her market value if she should leave the defendant or set up business on her own.

66. I do not accept the defendant’s contention that the plaintiff, by this email, resigned from her employment.  Rather I accept the plaintiff’s evidence that she never intended to resign from the defendant.

67. All that can be said from a reading of this email is that by 28 December, negotiations broke down between the plaintiff and Rauch as to agreeing a new salary for the plaintiff to continue her employment with the defendant.  The fact that negotiations broke down between them does not put an end to the existing contract of employment.  Nor did the defendant give 30 days’ notice of termination to the plaintiff after such negotiations for a new salary broke down.

68. In the final submission, counsel for the defendant put the defendant’s case on this footing :

(a)	at the breakfast meeting between the plaintiff and Rauch on 1 November 2001, oral notice of termination to take immediate effect was given to the plaintiff to end her old terms under the employment letter;
(b)	plaintiff was given two options : to leave or remain with Quorum LLC;
(c)	should plaintiff choose to leave, she would be entitled to 30 days’ notice;
(d)	should plaintiff choose to continue, she would be put on the new terms and conditions under the new compensation plan with immediate effect;
(e)	by accepting the new terms at a base salary of US$55,000.00 per annum with no guaranteed bonus or participation (fees split), the plaintiff had agreed to such a new agreement and had by conduct waived her right to 30 days’ notice; and
(f)	in addition, the parties were agreeable to continue to negotiate a higher base salary if plaintiff would be able to justify a figure above US$55,000.00 per annum.

69. I have no hesitation in rejecting such an argument for two good reasons.  On a proper construction of the terms of the employment letter, the defendant could not give notice of termination to take immediate effect on the plaintiff in respect of her employment.  Secondly, the submission in (e) above, saying that the plaintiff had accepted the new terms at a base salary of US$55,000.00 per annum militates against the contents of the emails from Rauch quoted above which clearly states that the plaintiff had not agreed to US$55,000.00.

70. In any event, I accept the plaintiff’s evidence as to what had transpired at the meeting on 1 Novemebr 2001 and reject the evidence of Rauch in that respect.  I find that no proper oral notice of termination in accordance with the terms of the letter of employment was ever given to the plaintiff, whether at the 1 November meeting or at any other time.  I also find that the plaintiff did not resign from her employment with the defendant on 28 December as suggested by the defendant.

71. It was also alleged by the defendant that the plaintiff had agreed with Rauch to receiving a consultancy fee of US$5,000.00 for the work done by her in January 2002 and that such an agreement was made over a telephone conversation between them on 3 January 2002.  This was denied by the plaintiff.

72. Once again, I do not accept the evidence of Rauch on this but prefer the evidence of the plaintiff and I find that there was no such agreement, but the it was a unilateral act on the part of the defendant paying US$5,000.00 to the plaintiff for the month of January 2002.

73. By reason of the above findings, and also the fact that I was specifically requested by counsel for the defendant to make a specific finding as to when the employment of the plaintiff terminated (since it cannot continue indefinitely), I am also of the view that it would be in order for me to come to such a determination in this matter.

74. The starting point must be the fact that since no proper notice of termination has been given by the defendant and that the plaintiff herself had not resigned from her employment with the defendant, the employment could only have come to a termination by the conduct of the parties.  In this respect, it is the conduct of both parties that I will have to look to determine this issue.

75. In this respect I take into account the following matters :

(a)	on 20 February 2002, Rauch by an email was asking the plaintiff for her views on the amount to bill Fidelity after having been informed by the plaintiff on 8 February that Benson Tam had signed the contract with Fidelity;
(b)	after a discussion between Rauch, John Barnes and the plaintiff, a decision was made about the end of February that they would bill Fidelity for US$20,000.00;
(c)	about 20 March 2002, Fidelity sent a cheque to the defendant’s office in Hong Kong.  Unfortunately, that cheque was made out for HK$20,000.00 instead of US$20,000.00;
(d)	when this error was discovered by the plaintiff after receiving the cheque, she called Fidelity to inform them of the mistake and for it to be corrected;
(e)	Fidelity then made out a replacement cheque for HK$156,000.00 (equivalent to US$20,000.00) which the plaintiff picked up from Fidelity’s office on 26 March 2002; and
(f)	upon Quorum LLC learning of the fact that the plaintiff had picked up the replacement cheque from Fidelity’s office, they raised a hue and cry with Fidelity, effectively getting Fidelity to stop payment on the replacement cheque and to wire by TT  US$20,000.00 to the Quorum LLC bank account in New York.

76. I also take into account the fact that the April 2002 rent for the defendant’s utilization of temporary office facitlities in Regus was paid not by the plaintiff as she had done all along previously (and then claim expense reimbursement from Quorum LLC on behalf of the defendant), but by Rauch when he was in Hong Kong.

77. A further matter which I also take note of in this respect comes from the evidence of Daniel Auerbach of Fidelity.  It was suggested to him in cross-examination by the defendant that it was about 18 March 2002 that Rauch had informed him of the fact that the plaintiff was no longer with Quorum (Auerbach uses the term “Quorum” in his evidence without distinguishing between the defendant and Quorum LLC since his evidence was that he had never looked upon them to be separate entities).  The answer given by Auerbach to that suggestion was that he thought it was some time later than 18 March when he learned that the plaintiff was no longer with Quorum because firstly, he was travelling in mid-March and away from the office, and secondly, if he had known that the plaintiff was no longer with Quorum, he would not have recommended Quorum (but only the plaintiff) to Jenny North.

78. Lastly there is also evidence from the plaintiff that when Rauch was in Hong Kong about 20 March 2002, he did not notify her of his coming to Hong Kong when on all previous occasions he would inform her beforehand, even if he was just passing through.  On that occasion, however, the plaintiff was informed by Benson Tam that Rauch was in Hong Kong and she managed to call him and meet with him.

79. All of the above matters indicate that firstly, the plaintiff was still carrying out her work with the defendant at least up to the time when the Fidelity placement for Benson Tam concluded with the payment being wired by TT to the bank account of Quorum LLC at the end of March 2002.  Secondly, it also shows that the relationship between the plaintiff and her employers, in particular Rauch, had broken down so irretrievably that Rauch did not even inform the plaintiff of his being in Hong Kong on 20 March 2002, and also that Quorum LLC did have some misgivings of the replacement cheque being in the hands of the plaintiff and would rather Fidelity wired the payment by TT to its bank account in New York.  Moreover, the fact that the plaintiff did not pay the April rent to Regus but left it to Rauch to pay is another clear indication that even the plaintiff considered that the relationship between herself and her employers had completely broken down by the end of March.

80. For these reasons, I come to the conclusion that by their conduct, the relationship of employer and employee between the plaintiff and the defendant came to an end at the end of March 2002.

81. Taking an overview of all the evidence in this case, I am drawn to the conclusion that much as the defendant would have liked to terminate the plaintiff’s employment upon the terms of the letter of employment and to start her on the terms of the new compensation plan, they could not afford to do so because the Fidelity assignment had not yet been concluded and they need the plaintiff to see it to its conclusion.

82. Therefore for November and December 2001 they paid the plaintiff what would have been her salary under the new compensation plan had she accepted it, but the plaintiff did not accept it.

83. The defendant strung her along with promises of negotiating a new salary package.

84. When the plaintiff was still complaining of being underpaid in January 2002, the defendant decided to sweeten her up by giving her what they called a consultation fee of US$5,000.00.

85. When Benson Tam signed the employment contract with Fidelity on or about 8 February 2002, the defendant stopped paying her any form of remuneration for the month of February onwards.

86. Because of the attitude adopted by the defendant towards the plaintiff in this respect, they were obviously fearful when the learned that the replacement cheque had ended up in the plaintiff’s hands.  They kicked up a fuss causing Fidelity to stop payment on the replacement cheque and to wire the US$20,000.00 direct into Quorum LLC’s account in New York.

87. I have no difficulty accepting the plaintiff’s evidence that she was only doing her duty towards the defendant when she picked up the replacement cheque from Fidelity’s office.

Claim for arrears of salary

88. Having decided the two main issues in the way that I have above, namely that the plaintiff was employed by the defendant and that the contract of employment between the plaintiff and the defendant terminated by conduct of the parties at the end of March 2002, it follows there from that the plaintiff is entitled to claim arrears of salary from the defendant as follows :

Balance of outstanding salary for November 2001	US$6,250.00
Balance of outstanding salary for December 2001	US$6,250.00
Balance of outstanding salary for January 2002	US$5,833.33
Unpaid salary for February 200	US$10,833.33
Unpaid salary for March 2002	US$10,833.33
Total:	US$39,999.99

Claim for fees split

89. Under this head of claim, the plaintiff claims 25% of US$11,500.00 being the initial instalment/retainer for the Fidelity August 2001 assignment which had been received by Quorum LLC in November 2001 and also 25% of the US$20,000.00 received by Quorum LLC from Fidelity at the end of March 2002 being the final invoice for the same Fidelity assignment.

90. The defendant disputes the plaintiff’s entitlement to a split of the Fidelity assignment on the grounds that the plaintiff did not “originate” the August 2001 Fidelity assignment but it was an assignment originated by Rauch and Goldwyn in New York after a meeting with Daniel Auerbach.

91. The plaintiff on the other hand says that she originated the Fidelity assignment and in fact it is not disputed that the original Fidelity assignment was given to her by Auerbach back in 2000 even before she signed the employment letter with Quorum LLC on 1 November 2000.  That assignment from Fidelity was transferred to Quorum after the plaintiff had entered into the employment letter with Quorum LLC.

92. However, in April 2001, the assignment was put on hold at the request of Fidelity because of internal restructuring.  It was restarted in August 2001. When it was restarted in August 2001, the search became a global search instead of being just a search confined to the Asia region.  That assignment ended with the placement of Benson Tam and his signing a contract with Fidelity in February 2002.

93. Daniel Auerbach gave evidence of this matter.  It was his evidence that the assignment which was restarted in August 2001 was a continuation of the original mandate which he gave to the plaintiff back in 2000.

94. The mandate from Fidelity given to the plaintiff was mentioned in the 2^nd paragraph of the employment letter between the plaintiff and Quorum LLC.

95. I have no difficulty accepting both the evidence of the plaintiff and that of Daniel Auerbach on this matter.

96. There can be little doubt that had the plaintiff not entered into an employment contract with Quorum LLC, the mandates from Fidelity would not have found its way to Quorum LLC or the defendant.

97. The fact that the search which was restarted in August 2001 expanded to being a global search does not detract the least bit from it being business originated by the plaintiff.

98. Under clause 5 of the letter of employment the plaintiff was entitled to receive 25% of the revenue of the business she originates payable upon the receipt of funds from the client.

99. I therefore reject that contention put forward by the defendant

100. A 2^nd ground put forward by the defendant is that of the US$2,875.00 claimed by the plaintiff (being 25% of the US$11,500.00 initial instalment/retainer for the Fidelity August 2001 assignment), US$375.00 relates to expenses while only US$2,500.00 relates to fees.

101. It is contended by the defendant that the plaintiff is not entitled to a split of both fees and expenses.

102. On the other hand, the plaintiff says that in the past, she had been 25% split for both fees and expenses on previous ALT and Fidelity invoices.

103. The defendant does not dispute those payments made on previous occasions but say that they were made on an ex gratia basis and not as a matter of entitlement.

104. In the letter of employment, no distinction is made between “fees” and “expenses”.  Only the word “revenue” and the phrase “receipt of funds from the client” are used.

105. The letter of employment, having been drafted by Quorum LLC, in the absence of any clear cut distinction that the plaintiff’s entitlement to split fees relate only to fees and not to expenses, I am not prepared to read those terms in the way that the defendant contends.

106. Accordingly, the plaintiff is entitled to the claimed amount of US$2,875.00 and US$5,000.00 as claimed by her.

Expenses reimbursement

107. The claim for expense reimbursements are itemized in three spreadsheets at pages 69, 70 and 70A of Bundle 3 of the documents relating to the periods 4 December 2001 to 20 February 2002, 21 February to 28 February 2002 and 1 March to 31 May 2002.

108. There is no dispute that the payments in respect of all items contained on all the spreadsheets have not been incurred.

109. What is disputed by the defendant is that since the plaintiff’s employment had been terminated, she was no longer entitled to claim expense reimbursements.  At least that was the reason why she was not reimbursed for the expenses after November 2001.

110. In final submission, counsel for the defendant was contend to submit that the plaintiff was not eligible for expenses reimbursement beyond January 2002.

111. Having made the finding above that the contract of employment between the plaintiff and the defendant came to an end by their conduct at the end of March 2002, it would follow that the plaintiff should be entitled to claim reimbursements for all expenses incurred up to the end of March 2002 but not those incurred after that date.

112. Accordingly, she will be entitled to the full amount claimed in the first and second spreadsheets, namely, HK$9,639.90 and HK$320.00.

113. As for the third spreadsheet, she will only be entitled to be reimbursed for the sum of HK$138.00 for the cell phone which amount was incurred on 24 March 2002.  The rest of the items on the third spreadsheet were all incurred after the end of March 2002.

Summary of claims 

115. Accordingly, there will be judgment for the plaintiff in the total sum of HK$383,522.80.

116. There will be a further order that interests on the judgment sum be paid by the defendant at the rate of 6% from the start of this claim in the Labour Tribunal to the date of this judgment and thereafter at judgment rate.

Costs

117. There will be a costs order nisi that the defendant pays to the plaintiff :

(a)	the costs for that part of this claim started and continued in the Labour Tribunal before its transfer to the High Court to be taxed if not agreed; and
(b)	the costs of this action after transfer to the High Court to be taxed on the High Court scale if not agreed.

118. I have ordered taxation on the High Court scale for that part of this case after transfer to the High Court because this case was transferred to the High Court by the order of the Labour Tribunal adjudicator upon the application of the defendant.  It was not of the plaintiff’s doing that the case was heard in the High Court.  Thus the fact that the judgment amount being only HK$383,522.80 should not deprive the plaintiff to have the costs of this action taxed on the High Court scale.