HON FOO CHOI v. HOMETEK INTERNATIONAL LTD

DCCJ 3129/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3129 OF 2014

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JUDGMENT

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1.  The plaintiff (“Hon”) was the defendant (“Hometek”)’s employee from 19 August 2008 to 2 September 2013. After leaving Hometek, Hon lodged a claim against Hometek in the Labour Tribunal on 24 December 2013 (LBTC 4108/2013, “the LT proceedings”) for bonus and disbursements of some expenses incurred by him when he was working for Hometek. As a result of a complicated counterclaim raised by Hometek in the LT proceedings, the case was transferred to this court.

BACKGROUND

2.  Hometek is a company incorporated in Hong Kong and carrying on business of trading in home appliances.  Mr Yip Po Chun (葉寶振) (“Yip”) is a director of Hometek.

3.  By a written employment contract dated 18 August 2008 (“the Written Employment Contract”), Hometek agreed to employ Hon and Hon agreed to work for Hometek.  The Written Employment Contract was signed by Mr Tong Kwok Kuen (唐國權) (“Tong”, Hometek’s engineering manager) on behalf of Hometek as employer and by Hon as employee. The terms of the Written Employment Contract are as follows:-

“We are pleased to offer you a post of Engineering Consultant in our company on the following terms effective at August 19, 2008:-

1	Salary	HKD25,000 per month
2	Termination	One month notice is required by either side
3	Starting Date	August 19, 2008
4	Place of Work	Per company assignment
5	Working Time	Mon – Fri 09:00 – 18:00 Sat 09:00 – 13:00 Lunch time 12:30 – 13:30
6	Expense claim	The employee can claim reasonable air freight travelling expenses per month.  Other expenses related to the work can be claimed in monthly basis
7	Employment Period	A period of 5 years from the effective date, and would be negotiated on contract expiry.
8	Annual Bonus	HK$100,000 each half year.  First payment will be paid before Chinese New Year during the contract period.
9	Vacation	Base on Labor Law
10	Retirement scheme	Our Company has a contributory retirement benefits Scheme.  You should contribute 5% to the fund which will be deducted from your monthly salary.  Membership to the scheme is compulsory for all permanent and contract staff.
11	Medical benefit	The Employee s entitled to the medical according to the company regulation.

The Employer and the Employee hereby declare that they understand thoroughly the above provisions and further agree to sign to abide by such provisions.  They shall each retain a copy of this contract for future reference.”

4.  It is common ground that Hon worked for Hometek as an engineering consultant from 19 August 2008 to 2 September 2013, and left Hometek after 2 September 2013.

5.  While Hon was working for Hometek, Hometek always placed Hon in Ningbo, but would also require Hon to work in other places in the Mainland sometimes.

6.  After leaving Hometek, Hon commenced the LT proceedings against Hometek on 24 December 2013 for outstanding bonus of HK$284,782.60 and disbursements in the total of HK$103,840.79.  Apart from disputing Hon’s claim, Hometek raised a complicated counterclaim in the LT proceedings. 

7.  Hometek’s counterclaim is complicated because in the counterclaim, Hometek introduces an episode in Dongguan which contains many details.  In order to understand the Dongguan episode, it would be necessary to set out the relevant paragraphs pleaded by Hometek in its counterclaim:-

“Misappropriation of Assets

10. In or about May 2013, the Defendant entered into an oral agreement with a Mr. Yuen Chung Hoi (袁仲開) [transliteration], who was the sole shareholder and director of a mainland company, namely 東莞星域塑膠製品有限公司 (“Xingyu”), which was a supplier of the Defendant (“the Xingyu Agreement”). At the relevant time, Xingyu was suffering from grave financial difficulties and all its assets were frozen by the local village government authority, namely東莞市石碣鎮沙腰村委. In fact, by the end of April 2013, the factory of Xingyu had already ceased its operation and the possession of all its assets were taken over by 東莞市石碣鎮沙腰村委. As a result, no one could remove or take away or sell any asset of Xingyu from the factory of Xingyu until the debts and outstanding salaries owed to Xingyu’s creditors and employees were paid and consent obtained from東莞市石碣鎮沙腰村委.

11. Pursuant to the Xingyu Agreement, Mr. Yuen agreed to assign all the interests of the assets of Xingyu to the Defendant and the Defendant agreed to settle all outstanding debts and salary payments owed by Xingyu to the creditors and employees of Xingyu.

12. In or about May 2013, the Defendant instructed the Plaintiff to assist Mr. Yip to liaise with the employees and creditors of Xingyu. and The Plaintiff was entrusted by the Defendant to represent the Defendant to sign settlement agreements with creditors of Xingyu, although the Defendant was later advised by its PRC lawyer that the settlement agreements should be signed by the legal representative (法人代表) of the Defendant, namely Mr. Yip Po Chun. The Plaintiff was also entrusted by the Defendant to keep an eye on the assets of Xingyu so as to ensure that all assets of Xingyu could be transferred to the manufactory of the Defendant in Jiangxi, China after the Defendant has settled all outstanding debts and salaries owed by Xingyu to the creditors and employees of Xingyu.

12A. On 14th June 2013, on the request of Mr. Yip of the Defendant, Xingyu issued a written authorisation to the Defendant to authorise the Defendant to handle the debts, salaries in arrears, rental in arrears and other matters concerning with the winding up of Xingyu.

12B. By 20th June 2013, the Defendant had already settled all outstanding salaries of Xingyu’s employees and signed settlement agreements with all Xingyu’s creditors.

12C. On 20th June 2013, the employees of Xingyu signed acknowledgement of receipt of their outstanding salaries.

12D. Also on 20th June 2013, the local village government authority, namely東莞市石碣鎮沙腰村委 issued a written confirmation (確認書) to confirm the arrangement as per the Xingyu Agreement.

13. Since 20th June 2013, all assets of Xingyu were free from encumbrance and became assets of the Defendant. The Plaintiff was then entrusted by the Defendant to transfer all assets of Xingyu to the manufactory of the Defendant in Jiangxi, China.

13A. Amongst the assets of Xingyu inside its factory was an electric generator together with a huge rectangular diesel oil storage tank next to it. At the material time when Mr. Yip of the Defendant was negotiating the Xingyu Agreement with the said Yuen Chung Hoi (袁仲開), the Plaintiff had once told Mr. Yip that there was plenty diesel oil inside the said diesel oil storage tank and he (the Plaintiff) estimated the amount of diesel oil to be 5,000 litres.

14. In or about August 2014, it came to the attention of the Defendant that some of the money and assets of Xingyu were missing and appropriated by the Plaintiff.  Subject to further discovery and interrogatories, the followings are the particulars which the Defendant can pinpoint at this stage in relation to the missing items and misappropriated assets of the Defendant:-

PARTICULARS

		Approximate Quantities	Approximate Market Value
1	Moulds & Tooling (including hand mixer and stick mixer 打蛋機模具)[1]		RMB200,000.00
2	Copper bits	250 kg	RMB15,000.00
3	Diesel oil	5,000 L	RMB40,000.00
4	Bulks of scrap Steel and other metal parts form from tool shop		RMB25,000.00
5	Bulks of other Scrap metal		RMB2,000.00
6	Cash proceeds from the sale of Scrap paper		RMB5,000.00
7	Semi-finished products Cash proceeds from the sale of the materials in the production line of Xingyu		RMB20,000.00
8	A Honda Car model no HG7152A (VTEC CVT) (“the said Car”)	1	RMB80,000.00
9	Metal press (五金沖床)	6	RMB120,000.00
		Total	RMB507,000.00

15. In breach of the terms set forth in Paragraph 5 hereof, the Plaintiff holds the misappropriated assets as a constructive trustee by the operation of law.  Despite repeated demands from the Defendant, the Plaintiff failed and refused to account for the missing assets of Xingyu in the aforesaid sum of RMB507,000.00 (“the said Appropriated Sum”).  Further and/or alternatively, in relation to the assets above which had been sold or disposed of by the Plaintiff, until the present hereof, the Plaintiff has failed to account to the Defendant for the sale proceeds of those missing items sold and disposed of. 

16. The said misappropriating acts of the Plaintiff and/or the incident relating to the missing items and assets of the Defendant were reported by the Defendant to the Mainland Police in or about January 2014 and to the Hong Kong Police in March 2014.

Accepting Secret Gift without Consent of Defendant

17. When the Plaintiff was discharging his duties in handling the Xingyu matters, the Plaintiff accepted the said car as a secret gift from Mr. Yuan Wai Kiu for secret interests unbeknown to the Defendant in July 2013 in breach of implied terms of contract of employment set forth in Paragraphs 5(f)(iii) to (v) hereof.

18. As a result, the Plaintiff as employee of the Defendant holds the said Car as constructive trustee for the Defendant.  To date, the Plaintiff has failed to return or account to the Defendant the said Car which is an asset of the Defendant.”

8.  Apart from the above, Hometek also claims that Hon is liable to pay a sum equivalent to his one-month wages to Hometek as payment in lieu of notice for the purpose of terminating the employment between him and Hometek.

9.  Accordingly, the issues to be resolved in these proceedings are as follows:-

In Hon’s claim

(a)   bonus

(b)   disbursements

In Hometek’s counterclaim

(c)   misappropriation

(d)   secret gift

(e)   payment in lieu of notice.

HON’S CASE

10.  Hon’s case is that he is entitled to have the bonus of HK$284,782.60 pursuant to clause 8 of the Written Employment Contract.  Further, pursuant to clause 6 of the Written Employment Contract, he should be reimbursed for the expenses incurred by him while he was working for Hometek in the Mainland from 1 October 2012 to 31 August 2013.  The total of these expenses is HK$103,840.79.

11.  Hon denies that he has ever misappropriated any asset belonging to Hometek.  As to the Honda car (“the Car”) mentioned in Hometek’s counterclaim, the Car was given to him by Mr Yuen Wai Kiu (袁偉翹) (“Yuen Junior”), the son of Mr Yuen Chugn Hoi (袁仲開) (“Yuen Senior”), as a gift and was not related to his work in Hometek.  Hon also denies that he is liable to make any payment to Hometek as payment in lieu of notice for the purpose of terminating the employment.

12.  Hon has filed witness statements made by the following persons in these proceedings:-

(a)   Hon himself

(b)   Yuen Junior, a director of 東莞星域塑膠製品有限公司(“Xingyu Factory”)

(c)   Chan Chi Hung (陳志洪) (“Chan”), a former director of Xingyu Factory

(d)   Leung Siu Cheung (梁兆璋) (“Leung”), an employee of Xingyu Factory in 2013

(e)   He Fu Zhi (何福志) (“HFZ”), executive secretary (執行書記) of the Sha Yao Village Authority (東莞市石碣鎮沙腰村委) in 2013

13.  Hon, Yuen Junior and Chan have given evidence in the trial, but Leung and HFZ have not attended the trial.

HOMETEK’S CASE

14.  Hometek’s counterclaim has been outlined in the above.  In response to the bonus claim and the disbursements claim made by Hon, Hometek contends:-

(a)   The Written Employment Contract is not the entire employment agreement between Hometek and Hon.  The employment agreement is partly oral and partly in writing.  Prior to the signing of the Written Employment Contract, there was an oral agreement between Yip on behalf of Hometek and Hon, in which Yip and Hon have agreed that the bonus would be in the discretion of Hometek.  Since Hon’s performance was unsatisfactory in various aspects, Hometek have exercised the discretion and decided not to give Hon the bonus.

(b)   As to the disbursements claimed by Hon, the total of the sums relating to Hon’s work is only RMB78,224.65.  Hometek previously has given some cash advancements (“the Cash Advancements”) to Hon, the total of which is RMB35,000.  Further, Hon has paid RMB2,000 as rental deposit (“the Rental Deposit”) to a landlord of his quarter in Ningbo.  The Rental Deposit later was forfeited by the landlord.  Hometek should not be responsible for the RMB2,000 under the employment agreement.  Hometek says that the total of the disbursements to be paid to Hon should only be RMB78,224.65 - RMB35,000 - RMB2,000 = RMB41,224.65

15.  Hometek has filed witness statements made by the following persons in these proceedings:-

(a)   Yip

(b)   Liang Li Quan (梁麗群) (“Liang”), cashier in the Dongguan representative office of Hometek

(c)   Tong

(d)   Zhu Xiang Hua (朱湘華) (“Zhu”), Hometek’s employee, responsible for quality control in the Jiangxi Nancheng (江西南城) factory (“Nancheng Factory”) of Hometek

(e)   Chen Jie Ying (陳桔英) (“Chen JY”), officer of a supplier supplying goods to Xingyu Factory in 2013

(f)   Zhang Wen Jun (張文軍) (“Zhang”), general manager of the Dongguan representative office of Hometek

(g)   Li Zhang Ping (李章平) (“Li”), head of the quality control department of the Dongguan representative office of Hometek in 2013

(h)   Huang Tao (黄濤) (“Huang”), production manager of the Nancheng Factory” in 2013

(i)   Guan Xue Feng (官學峰) (“Guan”), general manager of Nancheng Factory in 2013

(j)   Du Shui Tong (杜水通) (“Du”), deputy secretary (副書記) of the Sha Yao Village Authority in 2013

16.  Yip, Liang, Tong, Zhu, Chen, and Zhang have given evidence in the trial, but Li, Huang, Guan and Du have not attended the trial.

THE EVIDENCE

Witnesses who have not come to court

17.  Both sides have witnesses who have given witness statements in these proceedings but failed to attend the trial to give evidence.  The witness statements of these witnesses have not been confirmed under oath, and these witnesses have not been subject to cross-examination by the other side.  I would give no weight to these witness statements.

18.  I have considered whether I should draw any adverse inference because of the non-attendance of these witnesses in the trial.  It is well known that when a party without explanation fails to call a witness who he might be reasonably expected to call, the court may draw an adverse inference against the party that the evidence of the witness may not help the party’s case.  See Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434 at 443B, [28], in which the Court of Appeal applied O’Donnell v Reichard [1975] VR 916 and Cavendish Funding Ltd v Henry Spencer & Sons Ltd [1998] 6 EG 146. 

19.  The explanation offered must be a proper explanation.  Obviously, an explanation which is unreasonable, unsatisfactory and cannot stand under scrutiny cannot be regarded as an explanation at all.  See South China Securities Ltd v Lam Kwen Yuen [2012] 5 HKLRD 524 at 530, in which DHCJ Lisa Wong SC (as she then was) said:-

“7 I was reminded by Mr Leung, and I take note, of the principle that where a person without explanation fails to call as a witness a person who he might reasonably be expected to call, it is open to the Court to infer that that person’s evidence would not have helped that party’s case. See, eg Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434, 443E–444C, per Le Pichon JA citing O'Donnell v Reichard [1975] VR 916, 929, per Newton and Norris JJ. The same principle would apply to a failure without proper explanation to produce a document or other real evidence that a party might reasonably be expected to disclose.” (Emphasis added)

20.  Previously, on 15 June 2017, Hometek took out a summons for leave allowing Huang and Li to give evidence in the trial through video-link, and Yip has made an affirmation in support of the application.  That application was withdrawn subsequently.  However, Mr David Fong, counsel for Hometek, invited me to consider the explanation offered by Yip in that affirmation as to the difficulties of arranging Huang, Li, Guan and Du to come to the trial to give evidence.  In that affirmation, Yip said:-

(a)   Huang has been working for a new employer since March 2017.  His new employer refused to give him leave to come to Hong Kong to attend the trial.

(b)   Li would need time to apply for permit to come to Hong Kong, and he did not have sufficient time to get the permit before the commencement of the trial.

(c)   Guan would be working in the USA at the time of the trial.

(d)   Du, being an official in the Mainland, cannot give evidence in this trial.

21.  In my view, the explanation offered by Yip in relation to Huang, Li and Guan cannot be regarded as a proper explanation.  This trial is in the fixture list.  Each party shall check the availability of each of his witnesses before agreeing to fix the trial in a certain period.  If a party really wants a particular witness to come to the trial to give evidence, there is no reason why the party would not check the witness’ availability before fixing the trial dates.  However, Mr Lo Sek Man, counsel for Hon, has not asked me to draw any adverse inference against Hometek because of the absence of Huang, Li and Guan in the trial.  In respect of the absence of Du, I accept the explanation offered by Hometek.  In fact, Mr Lo has not asked me to draw any adverse inference against Hometek by reason of the absence of Du in the trial.

22.  As to the absence of the 2 witnesses on Hon’s side, ie Leung and HFZ, an explanation is offered by Mr Lo in relation to Leung, but no explanation is offered in relation to HFZ.

23.  Mr Lo submits that Leung is unable to come to the trial to give evidence because he cannot get leave from his employer.  This cannot be a proper explanation.  Firstly, the explanation should be supported by evidence and not merely by counsel from the bar table.  Secondly, as said above, a party has the obligation to check the availability of his witness before fixing the trial dates.  However, Mr Fong has not asked me to draw any adverse inference against Hon by reason of the absence of Leung in the trial.

24.  No explanation is offered by Hon as to the absence of HFZ in the trial. However, like Du, HFZ is also an official in the Mainland.  In fact, HFZ is more senior than Du.  The reason concerning Du would also apply to HFZ.

25.  Having considered the above, apart from not giving any weight to the witness statements made by the witnesses who have not come to the trial to give evidence, I would not draw any adverse inference against any party because of the absence of these witnesses.

Principles concerning evaluation of evidence given by witnesses

26.  As to evaluation of evidence given by witnesses, some valuable guidelines have been provided by DHCJ Eugene Fung SC in Hui Cheung Fai v Daiwa Development Ltd (HCA 1734/2009, 8 April 2014):-

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd's Rep 403 at 431 (Lord Pearce) …

78. In deciding whether to accept a witness's account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: eg Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5th May 2011) §39 (Chu J).

79. In determining a witness's credibility, I have also attached importance to the consistency of the witness's evidence with undisputed or indisputable evidence, and the internal consistency of the witness' evidence. The latter type of consistency is often tested by a comparison between the witness' oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses: Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36, 37 (Bokhary PJ).

81. The practical approach to assessing credibility of witnesses in a case such as the present may have best been summarised by the words of Robert Goff LJ, as he then was, in The Ocean Frost [1985] 1 Lloyd's Rep 1 at 57:-

“Speaking from my experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.”

82. Whilst these words were spoken in the context of a fraud case, I believe they are applicable to any case where a witness' credibility features prominently in the court's determination…” (Emphasis added)

27.  It is also worth to note what has been said by Sir John Dyson in MA (Somalia) v Secretary of State for the Home Department [2011] 2 All ER 65 on the effect of lies by a witness on a central issue. In that case, Sir John Dyson said:-

“31. …… where a claimant tells lies on a central issue, his or her case will not be saved by general evidence unless that evidence is extremely strong. It is only evidence of that kind which will be sufficient to counteract the negative pull of the lie. But much depends on the bearing that the lie has on the case. ……

32. Where the appellant has given a totally incredible account of the relevant facts, the tribunal must decide what weight to give to the lie, as well as to all the other evidence in the case, including the general evidence. ……

33. …… where the appellant tells lies on a central issue in the case, the [tribunal] may conclude that they are of great significance. …… It will be a matter for the [tribunal] to decide whether the general evidence is sufficiently strong to counteract what we have called the negative pull of the appellant's lies.” (Emphasis added)

28.  I bear these principles in mind in evaluating the evidence.

Hon

29.  Hon is an honest and reliable witness.  He answered the questions directly under cross-examination and would not shy away from the questions. Even the answer to a question is to his disadvantage and damaging his case, he would provide a candid answer without hiding anything.  A glaring example is when he was asked while he was employed by Hometek, whether he had used any time during his working hours to do his private business, Hon directly provided an answer in the affirmative.  He was then asked whether the plea in his reply that he did not use his working hours in office to do his own business was untrue, he answered “yes”.  He was further asked whether the statement of truth in support of the reply was untrue, he also answered “yes”.  Hometek in fact has no direct evidence showing that Hon had ever used any time during his working hours to do his private business.  However, when Hon was being asked on this topic, he directly and unreservedly provided the answers, which were to his disadvantage.

30.  Hon’s evidence is that he and Yuen Senior established Harbour Victory Industrial Limited (星域實業有限公司) (“HV”) in 2001.  In 2003, he left HV.  Although he knew Yip in about 1993, he had no contact with Yip before August 2008.  In August 2008, Yip through Chan contacted Hon, and invited Hon to meet him in a restaurant inside a hotel in Hong Kong.  That meeting took place on 18 August 2008.  During the meeting, Yip invited Hon to be the engineering consultant of Hometek.  There were some discussions as to the terms of the employment in the meeting.  Hon agreed to accept the invitation.  They then went to Hometek’s office in Hong Kong to do a written contract.  The written contract eventually signed by the parties is the one set out in paragraph 3 above.  The terms finally agreed by the parties have been set out on the Written Employment Contract. 

31.  Prior to the signing of the Written Employment Contract, he and Yip had never agreed that the bonus would be in Hometek’s discretion.  Hon emphasized that the annual bonus of HK$200,000 was part and parcel of the whole employment package, which was his entitlement and was not subject to Hometek’s discretion.

32.  Hon also said that during the meeting in the restaurant, he told Yip that he himself had some private business (being a consultant of a company in Germany, the business of which was to manufacturing some accessories used by bicycles and motor cars), and he would like to continue to do his private business after taking up the employment offered by Yip.  Yip answered that there would be no problem.  Hon said that that was why there was no provision in the Written Employment Contract prohibiting him from doing any other job while working for Hometek.

33.  Hon’s evidence in fact is supported by the evidence given by Tong.  Tong said that on or about 18 August 2008, Hon and Yip had a meeting in Hometek’s Hong Kong office, and Tong joined the meeting.  Yip told Tong what had been agreed between Yip and Hon previously, and Tong recorded down all those terms. Yip then asked Tong to prepare a written contract and left.  Tong then prepared the written contract by using a template in Hometek’s office.  Tong put in all the terms recorded by him and added the working time.  After reading the finished draft, Hon put his signature on it, and Tong also signed the same on behalf of Hometek.  This is the Written Employment Contract.

34.  According to Tong, all the terms agreed between Yip and Hon as told by Yip have been put in the Written Employment Contract.  Obviously, Yip did not mention to Tong that the bonus was in Hometek’s discretion.

35.  As to the expenses claimed by Hon, Liang raised various queries to those claims.  Hon has responded to some queries in paragraph 27 of his 2^nd supplemental witness statement.  Hon’s responses in essence are that the equipment purchased by Hon was still being kept in Hometek’s premises in the Mainland, the meal expenses were all related to Hometek’s work, and the rental expenses were the actual rentals charged by the landlord of Hon’s quarter in the Mainland.  Hometek has not adduced any satisfactory evidence showing that these responses are untrue.

36.  Hon is unable to respond to other queries raised by Liang, for he has forgotten the relevant details.  In my view, this is understandable.  I accept that Hon indeed has forgotten the relevant details.

(a)   According to Yip, the one handling the claims for expenses submitted by Hon was not Liang, but was a Joyce Yeung in Hometek’s Hong Kong office.  Hon would submit those claims to Joyce Yeung once every month.

(b)   Yip asked Liang to review the claims for expenses submitted by Hon after Hon suing Hometek in the Labour Tribunal.  In other words, the queries raised by Liang were only raised many months after Hon has submitted the claims.

37.  As to the misappropriation claim raised by Hometek, Hon said that Yip sent him to Dongguan in May 2013 to supervise the moving of the machines and the materials in the Xingyu Factory to the Nancheng Factory.  Hon said:-

(a)   He has not taken the items set out under paragraph 14(2), (3), (4), (5) and (9) of Hometak’s counterclaim.  Although he was supervising the moving process, the one who was in charge of the whole exercise was Yip.  Many people were involved, and things were not very organized.  There was no document recording all the details.  There was no complete record showing what were originally in the Xingyu Factory, what were moved from the Xingyu Factory to the trucks in Dongguan, and what were moved from the trucks to the Nancheng Factory in Nancheng.  Hometek has not adduced any satisfactory evidence to contradict Hon on these aspects.

(b)   As to the Moulds mentioned in paragraph 14(1) of the counterclaim, Hon admitted that the Moulds were in his possession.  Hon said that the Moulds originally were owned jointly by a Bruce Lee (李海波) and Yuen Junior.  Yuen Junior owed Bruce Lee RMB25,000.  Yuen Junior gave his interest in the Moulds to Bruce Lee to set off the debt owed by him to Bruce Lee.  Hon borrowed RMB35,000 from Chan and purchased the Moulds from Bruce Lee.  At that time, Hon intended to purchase the Moulds for Hometek’s use.  After purchasing the Moulds, Hon asked Yip to return RMB35,000 to him and take the Moulds.  Yip, after discussing with Tong and Zhang, refused.  The conversation took place in a restaurant in Dongguan (“the DG Restaurant”).  Thereafter, Hon repaid the RMB35,000 to Chan from his own resources and took the Moulds as his own properties.

(c)   Hon produced a handwritten receipt dated 20 June 2013 signed by Bruce Lee, evidencing that Bruce Lee had received RMB35,000 from him as the consideration for items (being the Moulds) in two documents with the nos 11211487 and 1211488.  The 2 documents are 2 release permits (放行條) dated 23 May 2013 and signed by Yuen Junior.  Each release permit was valid for 3 days only.  Hon said that he did not use the release permits to remove the Moulds from the Xingyu Factory.  He only treated the release permits as evidence showing that Yuen Junior had passed his interests in the Moulds to Bruce Lee.

(d)   Yip’s evidence is that he had no memory that Hon had suggested to him that Hometek should purchase the Moulds by spending RMB35,000.  Yip said that in May and June 2013, he was focusing on moving the machines and materials of the Xingyu Factory to the Nancheng Factory, which were worth several millions RMB.  Even Hon made the suggestion to him, he would not put this in his mind, as the amount involved was trivial.

(e)   As to when Hon made the suggestion to Yip that Hometek should purchase the Moulds by using RMB35,000, Hon’s evidence on this point is not very clear. However, given the lapse of time, it is understandable that Hon may not be able to remember the precise time.

(f)   Looking the evidence as a whole, I accept Hon’s evidence on the Moulds.

(g)   As to the cash proceeds mentioned in paragraph 14(6) and (7) of the counterclaim, Hon admitted that he had received the cash proceeds.  Hon said that he had passed the RMB25,000 to the staff of the Xingyu Factory for buying bottled water for the transportation workers and for paying other transportation fees.  He did not have any receipt in relation to these RMB25,000.

(h)   Liang said that she had seen the reports made by the Xingyu Factory’s staff.  It has not been mentioned in the reports that the Xingyu Factory’s staff had received RMB20,000 or RMB5,000 from Hon.  However, there were records showing that the staff did receive some money from Hon.  Liang said that the reports showed that the staff repeatedly received money from Hon.

(i)   In the light of Liang’s evidence as set out above, I accept Hon’s evidence in relation to these RMB25,000.

(j)   Hon denies that he has taken the metal press mentioned in paragraph 14(9) of the counterclaim.  Hometek has not adduced any satisfactory evidence to show that Hon has taken the metal press.  I accept Hon’s evidence on the point.

38.  As to the secret gift claim raised by Hometek concerning the car mentioned in paragraphs 14(8) and 17 of the counterclaim (“the Car”), Hon’s evidence is that the Car was a personal gift from Yuen Junior to him.  Yuen Junior gave the Car to him because Yuen Junior felt sorry for what his father had done to him, ie Yuen Senior expelled Hon from HV notwithstanding that Hon had made invaluable contributions to HV.  I accept that Yuen Junior gave the Car to Hon as a gift for a personal reason.  What exactly is the personal reason is not important.  It would be sufficient for me to say that there is no evidence proving the serious allegation made by Hometek in paragraph 17 of the counterclaim.

39.  Hon said that before October 2012, Hometek did not require strict proof of his claims for expenses.

40.  As a whole, I accept Hon’s evidence.

Yuen Junior

41.  Yuen Junior has given clear evidence.  He is a straightforward witness. I accept his evidence.

42.  In respect of the Car, Yuen Junior’s evidence is consistent with Hon’s evidence.

43.  In respect of the metal press mentioned in paragraph 14(9) of Hometek’s counterclaim, Yuen Junior said that the 6 units of the metal press had been sold by the Xingyu Factory to a company called 創利五金公司 (“CL”) in 2012.  CL has taken away 4 units from the Xingyu Factory in late 2012.  The remaining 2 units, with prior notice to Yip, were returned to CL at the time when Hometek was moving the machines and the materials from the Xingyu Factory to the Nancheng Factory.  Since Yuen Junior was a director of the Xingyu Factory, he had personal knowledge in respect of the dealings involving the Xingyu Factory. There is no satisfactory evidence from Hometek contradicting what Yuen Junior has said.

Chan

44.  Chan is also a straightforward witness who has given clear evidence.  He mentioned the following in his evidence:-

(a)   Yip approached him in 2008 and asked him to find and contact Hon.  He did so.

(b)   In 2013, Hon borrowed RMB35,000 from him to buy 2 sets of moulds. Later, Hon has repaid the money to him.

(c)   Hometek produced a movement record (轉移記錄) dated 19 May 2014 (“the Movement Record”) prepared by Chen Cheng Lin (陳成林) (“Chen CL”).  On the face of the document, Chen CL said:-

“星域關閉期間
轉移記錄

(1) 全部壓鑄機 – 陳生拉走

(2) 五金部所有設備 – 陳生拉走

(3) 模房所有銅公、銅料、模具鋼由杭生和陳生拉走

(4) 所有廢料、二條流水線、一套攪拌缸由我們處理，後然交給杭生現金人民幣二萬元整。”

(d)   Chan knew that Chen CL was the one retained by Hometek to collect and sell the miscellaneous materials remaining in the Xingyu Factory.

(i) Paragraph 1 of the Movement Record says that Chan has taken away certain machines from the Xingyu Factory.  Chan agreed to this and said that he took away the machines with the consent of Yip.

(ii) Paragraph 2 of the Movement Record says that Chan has taken away some equipment from the Xingyu Factory.  Chan denied.

(iii) Paragraph 3 of the Movement Record says that Chan and Hon have taken away some moulds and some materials from the Xingyu Factory.  Chan denied that he had taken away the materials but agreed that he had taken the moulds with Yip’s consent.

(iv) Paragraph 4 of the Movement Records says that the sale proceeds of RMB20,000 obtained after selling some miscellaneous materials in the Xingyu Factory have been given to Hon.  Chan said that he had no idea concerning this item.

45.  Hometek moved the machines and the materials in the Xingyu Factory to the Nancheng Factory in May and June 2013.  The Movement Record was made on 19 May 2014.  This is not a contemporaneous document.  The basis of the Movement Record is not known.  Chen CL has not confirmed the Movement Record on oath and has not been subject to cross-examination.  The Movement Record therefore carries little weight. As to the differences between Chan’s evidence and the Movement Record, I prefer Chan’s evidence. 

46.  Hometek has not adduced any satisfactory evidence to contradict Chan’s evidence.  I accept Chan’s evidence.

Yip

47.  Yip is not a truthful witness.  He was evasive, always shied away from the questions put to him during cross-examination and just said whatever he wanted to say.  His evidence is obviously untrue or unreliable on various important issues.

48.  Yip said that he had reached an oral agreement with Hon before Hometek and Hon entering into the Written Employment Contract.  Yip said that he and Hon had agreed orally that the bonus was in Hometek’s discretion.  Yip’s evidence on this issue is contradicted by Tong’s evidence.  As set out above, Tong’s evidence is that he has recorded that all the agreed terms between Yip and Hon as told by Yip, and put all those terms in the Written Employment Contract. Clearly, Yip did not mention to Tong that the bonus was in Hometek’s discretion.  If Yip and Hon had agreed that the bonus was discretionary, as this was an important term, Yip would not miss this when relating the agreed terms to Tong.  I do not believe Yip on this issue.

49.  During cross-examination, when Yip was asked that some materials inside the Xingyu Factory might be HV’s assets and therefore did not belong to the Xingyu Factory, Yip said that the Xingyu Agreement orally reached between him and Yuen Senior did not only cover the Xingyu Factory’s assets, but also covered all the HV’s assets placed inside the Xingyu Factory.  In other words, by the Xingyu Agreement, Hometek did not only acquire the Xingyu Factory’s assets, but also all the HV’s assets placed inside the Xingyu Factory.  I must say that this is something invented by Yip when he was inside the witness box.

50.  The ambit of the Xingyu Agreement is pleaded in paragraph 11 the counterclaim, which is clear and unequivocal:-

“Pursuant to the Xingyu Agreement, Mr Yuen agreed to assign all the interests of the assets of Xingyu^[2] to the Defendant and the Defendant agreed to settle all outstanding debts and salary payments owed by Xingyu to the creditors and employees of Xingyu.”

51.  The counterclaim in fact is the re-re-re-re-amended counterclaim, which means is the 6^th version of the counterclaim.  Each and every version of the counterclaim is verified by a statement of truth signed by Yip. Notwithstanding the numerous amendments made to the counterclaim, the contents of paragraph 11 of the counterclaim have never been amended.  At all times in these proceedings, Hometek is legally represented.  If the ambit of the Xingyu Agreement as pleaded in the counterclaim is incorrect, no doubt Hometek’s legal representatives would have applied for leave to amend the same.  Yet there has never been any application for leave to amend that the contents of that paragraph 11.

52.  What has been said by Yip inside the witness box as to the ambit of the Xingyu Agreement is clearly inconsistent with what has been pleaded in the counterclaim.  In the light of paragraph 11 of the counterclaim, the ambit of the Xingyu Agreement as said by Yip in the witness box must be a recent invention and untrue.

53.  Yip mentioned in his evidence that the machines and materials moved from the Xingyu Factory to the Nancheng Factory were worth several millions RMB. That means the Xingyu Agreement is an agreement concerning a transaction involving several millions RMB.  During the negotiation leading to the Xingyu Agreement, it would be more probable than not that there would be documents showing the assets and the liabilities of the Xingyu Factory at that time (“the Assets and Liabilities Documents”), for example, the auditor’s reports (審計報告) concerning the Xingyu Factory.  One could only know whether it would be a good deal by agreeing to settle all the Xingyu Factory’s liabilities in order to get all its assets in return after seeing the Assets and Liabilities Documents.  Such documents are clearly relevant documents in these proceedings, for these documents would show whether all the Xingyu Factory’s liabilities have in fact been settled by Hometek^[3], and what assets have been acquired by Hometek under the Xingyu Agreement. Obviously, under the Xingyu Agreement, Hometek would only acquire the assets owned by the Xingyu Factory, not the assets owned by any other persons or companies or any other assets.  Importantly, Hometek has to show that the assets mentioned in its misappropriation claim are assets belonging to the Xingyu Factory and acquired by Hometek by the operation of the Xingyu Agreement.

54.  However, no Assets and Liabilities Documents have been disclosed by Hometek in these proceedings.  There can only be 2 possibilities:-

(a) The Assets and Liabilities Documents exist, but those documents do not help Hometek’s case.

(b) There is no such document.  In that case, at the time of the Xingyu Agreement, Yip in fact did not have a reasonable basis to say exactly what assets and how much Hometek would acquire by entering into the Xingyu Agreement.  If that is the case, Yip would not have a reliable basis to say that the assets mentioned in Hometek’s misappropriation claim are the assets acquired by Hometek under the Xingyu Agreement.

55.  In my judgment, Yip’s evidence saying that the assets taken away by Hon are Hometek’s assets is unreliable.

56.  The alleged oral agreement concerning discretionary bonus, the ambit of the Xingyu Agreement, and what assets have been acquired by Hometek under the Xingyu Agreement are all important issues in these proceedings.  Yip’s evidence on these issues are untrue or unreliable.  I have no doubt that Yip is not a reliable witness.  Whenever there is a conflict between the evidence given by Hon’s witnesses (including the evidence given by Hon himself) and Yip’s evidence, I prefer the former to the latter.

Liang

57.  Liang is unduly suspicious about things concerning Hon.  Many allegations made by her against Hon are unfounded.  I do not regard Liang as a reliable witness.

58.  After Hon commenced the LT proceedings against Hometek, Yip asked Liang to check the disbursements claimed by Hon.  Liang raised a lot of queries on the claims submitted by Hon.  However, save and except one query, Liang has not produced any documentary evidence or evidence from witnesses having personal knowledge of the relevant matters in support of the queries raised by her.

59.  Liang has only produced a document in support of one query raised by her.  Liang said that in the disbursement claims for expenses in April 2013, Hon had produced 3 official receipts (浙江省寧波市地方税務局通用定額發票, each for RMB100).  Liang said that the 3 official receipts were very dubious, for she had checked the 3 official receipts in the website called寧波市地方税務局發票信息查詢but she could not verify the 3 official receipts by following the procedures specified in the website.  Liang produced the search result from the website in support of her claim.  During cross-examination, Liang’s attention was drawn to a remark shown on the search result produced by her – “如果懷疑為假票, 請與當地税務機關聯系或撥打2366税務服務熱線”.  Liang was asked whether she had contacted the tax authority in Ningbo or made an enquiry by using the hotline to check the genuineness of the 3 official receipts, Liang answered that she had not done all these.  There is nothing in this query.

60.  Liang said that Hon at the behest of Yuen Junior took away the 6 units of metal press from the Xingyu Factory.  However, under cross-examination, Liang admitted that she was not in the Xingyu Factory at all times.  She did not actually see that Hon moved the 6 units of the metal press away from the Xingyu Factory.

61.  Liang said that Hon had pocketed the RMB25,000 as set out in paragraph 14(6) an (7) of the counterclaim.  The reason for Liang to say so is that she had never seen Hon to pass the RMB25,000 to the Xingyu Factory’s staff. However, Liang was not in the Xingyu Factory at all times.  Further, Liang admitted that in the reports made by the Xingyu Factory’s staff, there were records showing that the staff did receive money from Hon from time to time. In these circumstances, to say that Hon must have pocketed the RMB25,000 is a bold, unfair and unfounded allegation.

62.  Liang also said that Hon together with Chan had taken the copper bits of 250 kg as set out in paragraph 14(2) of the counterclaim, which was worth RMB15,000.  Liang did not witness Hon doing that.  She said she was informed of this by HFZ over a telephone conversation.  Even if this telephone conversation exists, it is not known whether HFZ was telling Liang something from HFZ’s own personal knowledge or from some hearsay sources.  Liang’s evidence on this point is based upon hearsay or even multiple hearsay and not supported by any other evidence.  I would not give any weight to evidence of this kind. 

Tong

63.  Tong is a straightforward and frank witness.  His evidence is clear.  I accept his evidence.

64.  I have already set out Tong’s evidence concerning the meeting in Hometek’s Hong Kong office prior to the signing of the Written Employment Contract. I accept Tong’s evidence.  Based upon what Tong has said, I reject the oral agreement on discretionary bonus alleged by Yip.

65.  Tong said that Hon was very skillful in matters concerning moulds.  In 2008, Hometek really needed someone like Hon to develop its business.  I accept this evidence.  Accordingly, it would not be a surprise that apart from giving a monthly salary of HK$25,000 to Hon, Hometek also has agreed to give a fixed annual bonus of HK$200,000 to Hon in the Written Employment Contract.

66.  As to the discussion concerning the Moulds in the DG Restaurant, Tong said that he did not participate in the discussion.  He did not hear that Hon asked Yip to pay RMB35,000 to buy the Moulds.  I do not doubt Tong’s evidence. Since Tong has not participated in the discussion, it would not be a surprise that Tong might have not paid full attention to the contents of the discussion and might not be able to remember the details of the discussion.  The only difference between Hon’s evidence and Tong’s evidence on this issue is whether Yip had consulted Tong before turning down Hon’s request.  Given the lapse of time, it is understandable that Hon and Tong have different memories on this minor point.  However, what is important is that there is no denial by Tong that Hon had suggested to Yip that Hometek might consider to buy the Moulds inside the DG Restaurant.

Zhu

67.  Zhu started to work for Hometek in 2009 and was responsible for quality control in the Nancheng Factory at present.  From 2012 to 2014, he was stationed in a factory in Cixi (慈溪) (“the Cixi Factory”, a supplier providing goods to Hometek) to monitor the quality of the products of that factory.

68.  In August 2015, Yip sent him to the Cixi Factory to investigate the performance of Hon while Hon was working in the Cixi Factory.  From the information collected by Zhu, Zhu concluded that Hon’s working performance in the Cixi Factory was not satisfactory.

69.  Apart from one matter, all the matters mentioned in Zhu’s investigation are based upon the hearsay evidence from some unspecified people in the Cixi Factory.  As the sources of the hearsay evidence are unspecified, I cannot give any weight to this evidence.

70.  The matter in which Zhu has some personal involvement is concerning a mould made by a factory called 余姚四門 (“YY”).  Zhu said that while Hon was in the Cixi Factory, he gave the business of making a mould to YY but did not disclose that YY was owned by his relatives.  The mould produced by YY was defective.  Zhu’s personal involvement in the matter is that he has checked the mould produced by YY and confirmed that the mould was defective.

71.  Zhu’s evidence concerning YY must be viewed in the light of Tong’s evidence on the same issue.  Tong said that when Hon asked YY to make the mould, Hon was still working in Hometek.  When the mould was finished by YY, Hon has already left Hometek.  Tong did not know whether Hon’s departure had any impact on YY’s performance.  Tong also said that when Hon was working in Hometek, Hon had introduced different factories to make moulds for Hometek. All the moulds produced by these factories were with good quality.  The incident mentioned by Zhu was the only single incident in which a factory introduced by Hon did not make a suitable mould.

Chen

72.  In 2013, Chen was the owner of a company supplying materials to the Xingyu Factory.  As from April 2013, the Xingyu Factory was in financial difficulties and was unable to pay the bills issued by its suppliers.  Chen, together with the representatives of other suppliers providing materials to the Xingyu Factory, surrounded the Xingyu Factory and did not let anything go out from the factory from mid May 2013 onwards.  After about 10 days, the Sha Yao Village Authority took over the control of the Xingyu Factory.

73.  Chen’s evidence is not disputed by Hon.  The evidence at most provides some background information of the Dongguan episode introduced by Hometek and is not relevant for the purpose of resolving the issues in this case.

Zhang

74.  Zhang is the person in charge of Hometek’s Dongguan representative office.  His evidence is brief.  Zhang said that he had never discussed with Yip and Tong as to whether Hometek should purchase the Moulds.  He also said that he could prove that the Hand Mixer Moulds were originally the properties of the Xingyu Factory.

75.  I note that there is no denial by Zhang that at one time inside the DG Restaurant, Hon suggested to Yip that Hometek might consider to buy the Moulds.  Zhang’s evidence is that Yip has never discussed with him as to whether Hometek should do so.  For the reason given in paragraph 66 above, I do not regard the discrepancy between Hon and Zhang on this issue as an important point.

76.  The proof adduced by Zhang to show the original ownership of the Hand Mixer Moulds is some email exchanges between Hometek and the supplier of some parts of a hand mixer.  I do not regard that the emails produced by Zhang as sufficient and satisfactory evidence showing that the Hand Mixer Moulds mentioned in paragraph 14(1) of counterclaim were originally the properties of the Xingyu Factory:-

(a) It is not known whether the hand mixer mentioned in the emails in fact is the hand mixer produced by using the Hand Mixer Moulds.

(b) Even if the answer is yes, the emails are some exchanges between Hometek and the supplier.  The emails cannot be evidence showing the original ownership of the Hand Mixer Moulds.

77.  Zhang’s evidence is not useful for the purpose of resolving the issues in this case.

BONUS

78.  If the oral agreement suggested by Yip is true and the bonus is in Hometek’s discretion, by reason of Hon having used some of his working time to do his private business, Hometek would have a valid reason to refuse to pay the bonus to Hon.  I note that there is no provision in the Written Employment Contract prohibiting Hon from doing any part-time job.  However, working time is expressly provided in the Written Employment Contract.  It is the contractual bargain between the parties that Hon would do Hometek’s work and not any other work during the working time.

79.  However, for the reasons set out above, in my judgment, Yip’s evidence as to the oral agreement between him and Hon specifying that the bonus would be in Hometek’s discretion is untrue.  I find that there is no such oral agreement.

80.  Mr Fong fairly submits that in the event that the court rejects the oral agreement suggested by Hometek, he accepts that Hometek would have a contractual obligation to pay the outstanding bonus to Hon, and the amount is HK$284,782.60.  I hold that Hometek is liable to pay the said outstanding bonus to Hon.

DISBURSEMENTS

81.  In respect of the disbursements claimed by Hon, Hon’s case is that all the disbursements claimed are expenses related to his works with Hometek from 1 October 2012 to 31 August 2013.  After taking the Cash Advancements into account, the net outstanding amount is HK$103,840.79.

82.  In my judgment, Hon is an honest and reliable witness and I accept his evidence.  As to the queries raised by Liang, those queries are not substantiated by reliable evidence.  Further, it would not be fair to Hon to require him to provide minute details of all the expenses after many months, bearing in mind no similar request has ever been made before.  I am of the view that Hon’s claims for disbursements are not in any way impeached by the queries raised by Liang.

83.  Mr Fong submits that 2 items should be deducted from the disbursements, ie (a) the Cash Advancements of RMB35,000, and (b) the Rental Deposit of RMB2,000 forfeited by the landlord of Hon’s quarter in Ningbo.  As to (a), according to Hon’s evidence (which has been accepted by the court), he has already deducted the RMB35,000 and the amount now claimed by him is the net amount.  Accordingly, there would be no need to have a deduction of RMB35,000 from the amount now being claimed by Hon.  As to (b), Mr Fong accepts that the forfeiture of the Rental Deposit was not due to any fault of Hon.  In the circumstances, I do not see a valid basis in support of the proposed deduction.  Clause 6 of the Written Employment Contract expressly provides that expenses related to Hon’s work can be claimed.  In my judgment, the Rental Deposit clearly is an expense related to Hon’s work and should be paid by Hometek.  The RMB2,000 should not be deducted from the disbursements.

84.  I allow Hon’s claim for disbursements in full, and Hometek shall pay HK$103,840.79 to Hon.

MISAPPROPRIATION

85.  The misappropriation claim made by Hometek must fail for various reasons.

Ownership

86.  In order to succeed on the misappropriation claim, Hometek must prove that the items mentioned in paragraph 14 of the counterclaim are Hometek’s assets.  According to Hometek’s pleaded case, Hometek’s ownership of these assets derived from the Xingyu Agreement as pleaded in paragraphs 10 and 11 of the counterclaim.  There are numerous problems concerning the Xingyu Agreement.

87.  Firstly, the Xingyu Agreement suggested by Hometek is an oral agreement reached between Yip and Yuen Senior.  I have held that Yip is not a reliable witness.  I note that Hometek has produced documentary evidence to show that (a) Hometek has paid salaries to the Xingyu Factory’s employees, (b) Hometek has purchased some debts owed by the Xingyu Factory to its creditors, and (c) the Sha Yao Village Authority issued a written confirmation (“the written confirmation”) (確認函) dated 20 June 2013, in which the authority stated that at the time of paying off the salaries of all employees of the Xingyu Factory, Hometek may remove the machines and moulds from the Xingyu Factory^[4]. These documents may show that there was an agreement between Hometek and the Xingyu Factory.  However, in the absence of any reliable oral evidence, these documents would not be sufficient proof showing that the terms of the agreement are those pleaded in paragraph 11 of the counterclaim.

(a) The written confirmation cannot be evidence proving the terms of the agreement are those pleaded in paragraph 11 of the counterclaim.  In the written confirmation, it is not stated that Hometek has to settle all the outstanding debts owed by the Xingyu Factory apart from paying the outstanding salaries.  Further, in the written confirmation, apart from the machines and moulds, other assets and interests of the Xingyu Factory are not mentioned. The contents of the written confirmation are substantially different from the terms pleaded in paragraph 11 of the counterclaim.

(b) From all the documents produced by Hometek, it is not known whether paying off the salaries of the employees and purchasing the debts from the creditors are all the obligations of Hometek under the agreement.  Further, it is not known in return, what exact items would Hometek obtain.

(c) In my judgment, Hometek has failed to prove that the terms of the Xingyu Agreement are those pleaded in paragraph 11 of the counterclaim.

88.  Secondly, there is no evidence showing that Hometek has settled “all outstanding debts and salary payments owed by [the Xingyu Factory] to the creditors and employees of [the Xingyu]”.

(a) It is pertinent to note that according to Hometek’s pleaded case, Hometek’s obligation under the Xingyu Agreement is to settle all (which means 100%, not some) outstanding debts and salary payments.

(b) There are documents showing that Hometek has purchased some debts owed by the Xingyu Factory to its creditors.  However, there is no evidence showing that all the outstanding debts has been settled by Hometek.

(c) There are documents showing that Hometek has paid the outstanding salaries to certain employees of the Xingyu Factory.  However, there is no evidence showing that the outstanding salaries due to all employees have been paid.  The written confirmation is not evidence showing that all the outstanding salaries have been paid.  The Sha Yao Village Authority in the written confirmation merely said that at the time of paying off all the outstanding salaries, Hometek might remove the machines and moulds from the Xingyu Factory.

89.  Thirdly, Hometek has created a further hurdle for itself in paragraph 12 of the counterclaim.  According to what has been pleaded in that paragraph, the settlement agreements between Hometek and the creditors of the Xingyu Factory were signed by Hon on behalf of Hometek, but in fact they should be signed by the legal representative of Hometek, namely Yip, and not by Hon.  So Hometek in its own pleaded case is saying that the settlement agreements have not been properly executed, and in turn the settlement agreements would not be valid and binding agreements.  In these circumstances, Hometek cannot claim that it has settled all the outstanding debts owed by the Xingyu Factory to its creditors, and Hometek cannot claim that it has performed its obligations under the Xingyu Agreement.  Without performing the obligations, Hometek would not get the benefits under the Xingyu Agreement, ie acquiring all assets of the Xingyu Factory.

90.  Fourthly, according to paragraph 11 of the counterclaim, Yuen Senior would need “to assign all the interests of the assets of [Xingyu Factory] to [Hometek]”.  Mr Fong concedes that according to this plea, it would be necessary for Yuen Senior to execute an assignment to transfer the interests of the assets to Hometek.  There is simply no evidence showing any assignment from the Xingyu Factory to Hometek.

91.  In my judgment, Hometek has failed entirely in proving that the items mentioned in paragraph 14 of the counterclaim are its own assets.

No appropriation by Hon

92.  There is no reliable showing that Hon has appropriated items (2), (3), (4), (5) and (9) in paragraph 14 of the counterclaim.

Appropriation by Hon with reasons

93.  In respect of the Moulds mentioned in paragraph 14(1) of the counterclaim, Hon admitted that these had been taken by him.  Hon said that the Moulds were originally owned by Yuen Junior and Bruce Lee, and he had purchased them from Yuen Junior and Bruce Lee.  I accept these.

94.  In respect of the RMB25,000 mentioned in paragraph 14(6) and (7) of the counterclaim, I accept Hon’s evidence that he had given the money to the staff of the Xingyu Factory for buying bottled water and paying transportation fees.

95.  I will deal with the claim in relation to the Car mentioned in paragraph 14(8) of the counterclaim later in this judgment.

Value

96.  A further problem in the misappropriation claim made by Hometek is that there is no satisfactory evidence proving the values of the items as pleaded in paragraph 14 of the counterclaim.  That paragraph has been specifically traversed by Hon in paragraph 11 of his reply.  Hometek would therefore need to adduce evidence to prove everything pleaded in paragraph 14 of the counterclaim, including the value of each item mentioned in that paragraph.

97.  Yip boldly made some assertions as to the values of the items while he was giving evidence.  However, Yip is a factual witness and not an expert witness.  His opinion on the values of the items are not admissible evidence. Further, there is no reasonable basis in support of his “valuation”.  In any event, I do not regard Yip as a reliable witness.

98.  In the absence of any reliable evidence showing the values of those items, even if Hometek succeeds in the misappropriation claim (wholly or partly), Hometek at most can only get nominal damages.  See Born Chief Co. (trading as Beijing Restaurant) v George Tsai and Another [1996] 2 HKLR 188.

SECRET GIFT

99.  I now deal with the Car mentioned in paragraph 14(8) of the counterclaim.  Hometek accepts that the Car was originally the personal property of Yuen Junior and was given by Yuen Junior to Hon as a gift. However, Hometek makes a very serious allegation in paragraph 17 of the counterclaim, ie Hon accepted the Car as a secret gift from Yuen Junior for “secret interests unbeknown” to Hometek in July 2013 in breach of the duties owed by Hon to Hometek.  This is a very serious but very vague allegation.

100.  I have drawn the parties’ attention to a Kerry Francis Moore v Jennex Group Ltd. (HCMP 2109/2015, 3 November 2016), in which DHCJ Kwok SC said:-

“32. A litigant or counsel must not make very serious allegations (including fraud) without cogent evidence supporting the same. This much is trite and I will cite two cases to make good this proposition.

33. In Associated Leisure Limited and others v Associated Newspapers Limited [1970] 2 QB 450 at p 456, Lord Denning MR said:-

“… the rule, well settled, which I will read from Gatley on Libel and Slander, 6th ed. (1967), p. 462, para. 1046:-

‘A defendant should never place a plea of justification on the record unless he has clear and sufficient evidence of the truth of the imputation, for failure to establish this defence at the trial may properly be taken in aggravation of damages.’

I have always understood such to be the duty of counsel.  Like a charge of fraud, he must not put a plea of justification on the record unless he has clear and sufficient evidence to support it.”

34.    In Choy Bing Wing v Chief Executive of HKSAR China and others [2006] 1 HKLRD 666 at §9, J Lam J (as he then was) said:-

“The Writ contained very serious allegations which should not be advanced without cogent evidence supporting the same. It is well established that the court will not allow allegations of such nature to be made without proper evidence and if they were made irresponsibly, it will exercise its inherent jurisdiction to strike out the same (see C S Low Investment & Others v Freshfields [1991] 1 HKLR 12 at p.23A–D; Tam Chi Kok Gabriel v Fok Eugina (unrep., HCA No 1859 of 1992, [2003] HKEC 723); Re Gagich (unrep., HCAJ No 361 of 1995); 林哲民訴特佳機器廠有限公司及另一人 (unrep., CACV No 122 of 2004) para.25).””

101.  Hometek tried to slip in evidence saying that Hon had given a favour to Yuen Junior in return as a result of the gift, and the favour was allowing Yuen Junior to get the 6 units of metal press from the Xingyu Factory.  This alleged favour given by Hon to Yuen Junior is unpleaded, and the allegation is extremely serious.  I would not allow Hometek to slip in evidence in this way. Litigants must always bear in mind the basic principles reiterated by Ma CJ in Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663:-

“21. It should by now really be quite unnecessary to issue yet another reminder on the rationale behind pleadings. The basic objective is fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case) so that proper preparation is made possible, and to ensure that time and effort are not expended unnecessarily on other issues:- Wing Hang Bank Limited v Crystal Jet International Limited. It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced. As the Court of Appeal remarked in Wing Hang Bank Limited v Crystal Jet International Limited:-

“(2) In a trial, particularly where evidence is given by witnesses, it becomes extremely important that each side knows exactly what are the live issues. Where issues are sought to be introduced that have not been adequately or properly pleaded, amendments must be sought unless the consent of the other party or parties has been obtained.  It will simply not do for unpleaded issues to be ‘slipped in’ when evidence is being given in the hope that the other side is not sufficiently alert to object.”

22. …… It is simply not permissible for an issue to be raised in this way: one does not sift through the evidence adduced in a trial in the hope that something was said that can conceivably found a cause of action. Issues, I would reiterate, must be properly pleaded unless for some reason the pleadings have assumed a less significant role in the proceedings. ……” (Emphasis added)

102.  The secret gift claim made by Hometek is vague and not supported by cogent evidence.  I have to say that Mr Fong has very properly not really pursued this point in his final submissions.

103.  This claim must be dismissed.

PAYMENT IN LIEU OF NOTICE

104.  Hometek claims that Hon is liable to make a payment in lieu of notice for the purpose of terminating the employment, the amount of which is HK$41,666.

105.  The Written Employment Contract is for a fixed-period of 5 years, starting from 19 August 2008.  Accordingly, that contract expired on 18 August 2013 by effluxion of time.  However, Hon continued to work for Hometek until 2 September 2013.   I am of the view that Hon and Hometek have by conduct extended the duration of the employment contract between them.  After 18 August 2013, all the terms of the Written Employment Contract continued with the exception that the duration of the employment would be for an indefinite term. On 2 September 2013, before Hon leaving Hometek, the employment between Hometek as employer and Hon as employee was governed by a continuous contract as defined in the Employment Ordinance (“EO”), for Hon had worked for Hometek continuously for more than 18 hours per week for 4 continuous weeks by that time.  See Lui Lin Kam & Others v Nice Creation Development Ltd [2006] 3 HKLRD 655, per Tang JA (as he then was):-

“22. As Lord Hoffmann has made clear in Cheng Yuen v The Royal Hong Kong Golf Club [1997] HKLRD 1132 at 1139 E to G:-

“The whole purpose of [Schedule 1 to the EO] was to equate the position of a regular casual employee with that of a person engaged under a continuous contract of employment.”

23. Put very briefly, a person who has worked for a minimum of 18 hours per week for 4 continuous weeks would be regarded as having been employed on a continuous contract.  That is so, even if each new day was the subject of a new contract of service for the day.  ……” 

106.  Section 5(1) of the EO provides:-

“(1) Every contract of employment, which is a continuous contract, shall, in the absence of any express agreement to the contrary, be deemed to be a contract for 1 month renewable from month to month.”

107.  By the operation of the ss.6 and 7 of the EO, in order to terminate the employment, Hon would have to give a one-month notice or payment in lieu of that notice to Hometek.  No notice was given by Hon to Hometek prior to his departure from the company.  In my judgment, Hon is liable to make a payment in lieu of notice to Hometek, and the amount of payment would be equivalent to his one-month wages under the employment.  For the purpose of calculating the wages, both the salary and the fixed bonus should be taken into account. Accordingly, Hon’s one-month wages under the employment would be HK$41,666.

108.  This claim made by Hometek is justified, and I allow the claim.

CONCLUSION

109.  For the reasons above, Hon succeeds in his claim against Hometek and Hometek shall pay the outstanding bonus of HK$284,782.60 and reimburse the expenses in the sum of HK$103,840.79 to Hon.  On the other hand, Hometek succeeds in claiming the payment in lieu of notice and Hon shall pay HK$41,666 to Hometek under this claim.  All the other claims in Hometek’s counterclaim are dismissed.  The net result would be Hometek shall pay the following to Hon:-

HK$284,782.60 + HK$103,840.79 – HK$41,666 = HK$346,957.39

110.  There should be interest on the HK$346,957.39 at the HSBC prime rate plus 1% from the commencement date of LT proceedings (ie 24 December 2013) to the date of this judgment, and at the judgment rate thereafter until full payment of the judgment sum.

111.  On the question of costs:-

(a) I handed down a decision on 23 June 2017 lifting the stay caused by Hon’s application for legal aid.  Costs of the submissions on whether the legal aid stay should be lifted have been reserved.  Mr Lo and Mr Fong have agreed that those costs should be paid by Hon to Hometek.  Mr Fong fairly submits that as he has not been briefed to handle the issue of lifting the legal aid stay, he would not claim a certificate for counsel in relation to those costs.

(b) Mr Lo and Mr Fong have agreed that the general rule of costs following the event should apply, with a certificate for counsel.  Further, the costs order to be made by this court should cover the costs of the LT proceedings.

112.  I note that Hon succeeds on all issues in these proceedings save and except the issue of payment in lieu of notice.  I have considered whether I should deprive Hon any costs because of Hon’s failure on this issue.  In my view, in respect of the issue of payment in lieu of notice, there is no dispute between the parties as to the underlying facts.  Both Hon and Hometek agreed that Hon had worked for Hometek from 19 August 2008 to 2 September 2013.  The difference between the parties is whether Hon should make a payment in lieu of notice to Hometek to end the employment in these circumstances.  The court has heard submissions from the parties and ruled in favour of Hometek on this issue.  The time spent on this issue is minimal.  In the light of the principles in Re Elgindata Ltd (No 2) [1992] 1 WLR 1207, in my judgment, Hon should not be deprived of any costs because of his failure on this issue.

113.  Accordingly, the costs reserved in my decision dated 23 June 2017 should be to Hometek.  For avoidance of doubt, no certificate for counsel is granted in respect of those costs.  Save and except those costs, both the costs of the claim and the costs of the counterclaim should be to Hon, with a certificate for counsel.  To facilitate taxation, I would follow the approach in Able Contractors Ltd v Wui Loong Scaffolding Works Co Ltd (HCA 2587/2008, 16 July 2012) and order that save and except the costs reserved in my decision dated 23 June 2017, all costs of these proceedings and all costs of the LT proceedings (including all costs reserved, if any) be paid by Hometek to Hon, with a certificate for counsel.

114.  To conclude, the order made by this court is as follows:-

(a) Hometek shall pay HK$346,957.39 to Hon;

(b) there should be interest on the aforesaid sum at the HSBC prime rate plus 1% from 24 December 2013 to the date of this judgment, and at the judgment rate thereafter until full payment of the sum;

(c) save and except the claim for payment in lieu of notice, all the other claims in Hometek’s counterclaim be dismissed;

(d) costs reserved in the written decision dated 23 June 2017 be paid by Hon to Hometek;

(e) save and except the aforesaid costs, all costs of these proceedings and all costs of the LT proceedings (including all costs reserved, if any) be paid by Hometek to Hon, with a certificate for counsel; and

(f) all costs are to be taxed if not agreed.

115.  Lastly, it remains for me to thank Mr Lo and Mr Fong for the helpful submissions provided to this court.