GHAZI FAIDI v. QANTEX CAPITAL MARKETS LTD AND OTHERS

CACV 296/2023, [2025] HKCA 236

On appeal from [2023] HKCFI 2184

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 296 OF 2023

(ON APPEAL FROM HCA NOS 272 AND 486 OF 2018

(CONSOLIDATED))

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ACTION NO 272 OF 2018

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AND

ACTION NO 486 OF 2018

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(Consolidated by Order of Master Queenie Lau dated 2 October 2018)

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REASONS FOR JUDGMENT

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Hon Kwan VP (giving the Reasons for Judgment of the Court):

1.  This is the defendants’ appeal against the decision of DHCJ Sara Tong SC dated 25 August 2023 (“O 14 Decision”)[1], by which summary judgment was entered in favour of part of the plaintiff’s claims in the sum of US$750,000, and the 1^st defendant’s counterclaim for the sum of US$250,000 was struck out.

2.  The case requires the determination of the terms of a sign-on bonus agreed for the renewal of an employment contract. Two questions of construction are raised on appeal in relation to two sub-clauses of Schedule 2 to the employment contract.

3.  We wish to mention that this is the first occasion where a deputy judge of the High Court was requested to sit in the Court of Appeal. It is pursuant to the appointment made by the Chief Justice under sections 5(2) and 10(2) of the High Court Ordinance, Cap 4[2].

4.  We dismissed the appeal at the conclusion of the hearing. These are the reasons for our judgment.

Background

5.  The relevant background matters may be stated as follows.

6.  The plaintiff was an employee of the 1^st defendant (“the Company”), a licensed financial institution engaged in the business of stock brokerage. The 2^nd and 3^rd defendants (“D2 and D3”) are brothers. At different periods of time, they were and are the majority shareholders, directors and responsible officers of the Company.

(1)  Employment Agreement

7.  The plaintiff commenced employment with the Company for a fixed term of three years by an employment agreement dated 13 July 2011. He subsequently entered into a new employment agreement dated 3 April 2014 (“Employment Agreement”) with the Company for an initial term of 39 months, to be continued indefinitely upon the expiry of the initial term until terminated.

8.  The Employment Agreement contained terms that provided the plaintiff with incentive in the form of a sign-on bonus (“Sign-On Bonus”) for agreeing to continue his employment with the Company. Clause 7.1 provided as follows:

“… You will receive a one off payment for re-signing your employment contract. The details of this payment are outlined in Schedule 2. You agree to repay to the Company on a pro-rata basis any payment made under Schedule 2 if you resign or are summarily dismissed within 39 months of the Commencement Date.”

9.  Schedule 2 to the Employment Agreement (“Schedule 2”) contained the “details of this payment” referred to in clause 7.1 in the form of two options at the election of the plaintiff:

“You will be entitled to receive a one off payment for the re-signing of your employment contract. The payment will be at your choice of the following alternatives.

1) A cash payment of US$750,000

2) The Company agrees to:

a. Procure the transfer of 1,231,000 ordinary shares (the ‘Shares’) (representing a total of 5% of the Company’s outstanding ordinary shares) to you from existing shareholders within [days] of the execution of this Employment Contract (the ‘Transfer’);

b. Pay any stamp duty that may be payable in connection with the Transfer referred to in clause (2)(a) of this Schedule 2;

c. Procure on your behalf a Deed of Adherence to any existing shareholders’ agreement to which any other shareholders are a party at the time of the Transfer;

d. Between 3 October 2014 (being for the avoidance of doubt, a day 6 calendar months after the signing of this Employment Contract), up to and including the end of the Term (as defined in clause 2.1 of the Employment Contract), within 3 months of receiving written notice of exercise under this clause, transfer to you the sum of US$0.8124/share in consideration for the transfer to the Company (or its agent, nominee or assign) of the Shares (in any amount of shares that you elect, provided the maximum amount payable for the total of the Shares does not exceed US$1,000,000);

e. If any relevant transaction occurs by which the shareholders of the Company (including yourself, whether by way of tag-along or drag‑along rights acquired as a result of signing the shareholders’ agreement pursuant to clause 2(c) of this Schedule 2) agrees [sic] to surrender, transfer, or otherwise beneficially assign their interests in the shares of the Company to a third-party (the ‘Third-Party Buyout’), you agree that:

i. To the extent the right specified in clause 2 (d) of this Schedule 2 remains unexercised at the date of completion of Third-Party Buyout, such rights in clause 2(d) will expire and be replaced by the rights set out in clause 2(e)(iii) below; and

ii. any up-front cash payment for the Third-Party Buyout will be set off against any remedy sought under clause 2(f) of this Schedule 2.

And the Company further agrees that:

iii. At any point during the period between the completion of the Third-Party Buyout, and the end of the Term (as specified in clause 2.1 of the Employment Contract), you may elect to forgo any future earn-out rights which you may acquire as part of the Third-Party Buyout in return for a cash payment equal to the formula in sub-paragraph (1) below, which the Company agrees to make or procure within 3 months of being so notified;

1. CASH PAYMENT = US$1,000,000 less any consideration received as part of the Third-Party Buyout less any payment received pursuant to clause 2(d) above less any earn-out commission already received;

2. For the avoidance of doubt, and in the event of any dispute, it is the parties’ express intention that the formula in the preceding paragraph preserves a right by you to receive a total sign-on bonus of US$1,000,000 within the term, but to properly account for any consideration (whether upfront payments or earn-out commissions) that may be received as a result of any Third-Party Buyout.

AND Simon Gray and Matthew Gray, being a party only to this Schedule 2, jointly and severally agreed to procure the making of such cash payment referred to clause 2(e)(iii) above and further jointly and severally personally guarantee such payment should the Company fail to make such payment within 14 days.

f. Following any default of clauses … (2)(e) of this Schedule 2, at your election: …

ii. Liquidated damages of an amount equal to the greater of:

1. 5% of the value of the Company (as determined by the Company’s auditor at the date of the default); or

2. US$1,000,000.”(Emphasis added)

(2)  Subsequent transactions

10.  On or around 3 April 2014 (the day he entered into the Employment Agreement), the plaintiff exercised his ‘sign-on’ option in favour of the shares and not a cash payment of US$750,000. Pursuant to clauses 2(a) to (c) of Schedule 2, D2, D3, the plaintiff and the Company entered into a shareholders agreement (“Shareholders Agreement”) in July 2014, and D3 transferred 5% of the shares in the Company (“Shares”) to the plaintiff on 17 October 2014.

11.  On 24 December 2014, the plaintiff, D2 and D3 entered into a share purchase agreement (“SPA”) with CBD Investment (Cayman) Corporation (“CBD”) for the sale of 85% of the shares of the Company to CBD. The plaintiff was separately legally advised during the negotiation process of the sale and purchase[3]. Pursuant to the condition precedent of the SPA, the plaintiff, D2 and D3 entered into a Deed of Termination (“Deed of Termination”) on 4 December 2015 to terminate the Shareholders Agreement. Also on 4 December 2015, the parties to the SPA entered into a supplemental agreement to amend the terms of the SPA to provide for the payment of nominal consideration of US$1 on completion.

12.  On 28 January 2016, the plaintiff transferred the Shares to CBD. D3 also transferred his shares in the Company to CBD. CBD became the majority shareholder in the Company and the Company was run and controlled by CBD. D2 had a very much reduced role in it and D3 had all but totally stepped away from the Company[4].

13.  In August 2016, the parties to the SPA entered into a further supplemental agreement to amend the SPA to extend the time for payment of the “Initial Cash Consideration” of US$2.1 million odd. It was provided that subject to completion of the Capital Reorganisation on terms satisfactory to CBD, the Initial Cash Consideration shall be paid by CBD to the sellers after completion on a date agreed in writing between them.

14.  However, CBD failed to pay the consideration by the extended payment deadline. This led to the execution of an unwind deed dated 20 February 2017 (“Unwind Deed”) of the sellers in the SPA with CBD. D2, D3, CBD and the Company signed the Unwind Deed, while the plaintiff did not sign at the time. The shares of D2 and D3 in the Company were transferred back to them.

15.  On 10 February 2017, the plaintiff served a notice on the Company (“Notice”), with copies sent to D2 and D3 as guarantors of the Company’s liability under clause 2(e)(iii) in Schedule 2. The Notice read as follows:

“I refer to my contract of employment with [the Company] dated 3 April 2014. I am writing to notify you under clause 2(d) and 2(e)(iii) of Schedule 2 of my decision to elect to receive a cash payment calculated in accordance with sub-clause 1. Based on that formula, the payment due is USD1,000,000 (US Dollars one million). I look forward to receiving payment within three (3) months of the date of this notification in accordance with Schedule 2.”

16.  On 7 July 2017, the Company made a payment of US$250,000 in two separate tranches to the plaintiff but has not paid him the balance of the Sign-On Bonus in the amount of US$750,000.

17.  On 2 July 2017, the initial 39-month term of the Employment Contract was completed. The plaintiff’s employment with the Company came to an end on 3 October 2017.

(3)  The legal proceedings

18.  The plaintiff lodged claims at the Labour Tribunal against the Company in November 2017. He also brought proceedings against the Company, D2 and D3 in the High Court. The Labour Tribunal claims were transferred to the High Court and consolidated with the High Court action. He claimed, among other things, for the outstanding balance of the Sign-On Bonus of US$750,000 (“Bonus Claim”). The Company counterclaims, inter alia, for the return of the US$250,000 paid to the plaintiff on the ground it was made under mistake (“Bonus Counterclaim”).

19.  By a summons dated 16 July 2020, the plaintiff applied to have three preliminary questions of law or construction to be finally determined, and judgment entered in its favour for the sum of US$750,000 plus interest (ie the Bonus Claim), pursuant to Order 14A rule 1 of the Rules of the High Court and the inherent jurisdiction of the court (“O 14A Application”).

20.  The 1^st question is not relevant to this appeal. The 2^nd and 3^rd questions are as follows:

“Whether Notice was a valid notice under clause 2(d) of Schedule 2 of the Employment Agreement.” (2^nd question)

“Whether Notice was a valid notice under clause 2(e)(iii) of Schedule 2 of the Employment Agreement.” (3^rd question)

21.  The O 14A Application was heard by Recorder Winnie Tam SC. The recorder handed down her decision on 15 June 2022 (“O 14A Decision”)[5]. She dismissed the application with costs against the plaintiff.

22.  The recorder took the view that she did not have all the necessary facts and matters before her in order to determine the questions of construction on the 2^nd and 3^rd questions, in that there was no evidence available from the undisputed facts on whether the Notice was served before or after the date of completion of the Third-Party Buyout[6]. Clauses 2(d) and (e) are mutually exclusive, the right to payment of the Sign-On Bonus expires in so far as it is not exercised by the date of completion of the Third-Party Buyout, and is replaced by clause 2(e)(iii) during the period between the completion of the Third-Party Buyout and the end of the term of the plaintiff’s employment.

23.  She exercised her residual discretion in favour of not determining the 1^st question either. Notwithstanding this, the recorder went on to consider and provide her analysis on all of the three questions for the sake of completeness, and in deference to counsel’s arguments. In her analysis, she essentially acceded to all of the plaintiff’s arguments on the three questions of construction, and rejected the defendants’ contentions.

24.  The plaintiff issued a summons for summary judgment under Order 14 on 14 December 2022 for the Bonus Claim and to strike out the Bonus Counterclaim.

(4)  O 14 Decision

25.  The judge rejected the defendants’ contention that the Order 14 application ought to be considered an abuse of process. The O 14A Application was defeated because of how the 2^nd and 3^rd questions were framed, not by reason of the underlying merits of the Bonus Claim. The defendants have abandoned the abuse of process ground on appeal.

26.  The judge agreed with much of the reasoning of the recorder in construing the relevant provisions of the Employment Agreement. She held that the pleaded defences to the Bonus Claim do not have any merit or raise any triable issues, and the Bonus Counterclaim is not arguable, for the following reasons:

(1)  Clauses 2 and 5 of the Deed of Termination only had the effect of terminating the Shareholders Agreement, not the plaintiff’s right to the Sign-On Bonus[7];

(2)  The plaintiff was entitled to invoke Clause 2(d) of Schedule 2 because the beneficial title to the Shares remained with the plaintiff at the time the Notice was issued, as CBD did not pay the consideration for the transfer of the Shares and there is no basis for CBD to retain the legal title of the Shares. It has been holding the Shares on constructive trust for the plaintiff and is obliged to return them to him[8];

(3)  On the proper construction of Clause 2(e), this provision can be invoked even where (not only if) the plaintiff participates in the Third-Party Buyout by reason of tag-along or drag-along rights[9];

(4)  Clause 2(e) contains no requirement that the Notice has to specify the forgoing of earn-out rights and the plaintiff has made it clear in the Notice that he elected to forgo the future earn-out rights by indicating his election to receive cash payment[10];

(5)  Whether the plaintiff has signed the Unwind Deed or not cannot affect the validity of the Notice and his entitlement to the Sign-On Bonus[11];

(6)  Whether completion under the SPA had taken place when the Notice was issued is irrelevant to the Bonus Claim. If completion had taken place, the plaintiff was entitled to invoke clause 2(e) of Schedule 2. If completion had not taken place, the plaintiff was entitled to invoke Clause 2(d) of Schedule 2. Either way, the plaintiff is entitled to the Sign‑On Bonus[12].

Issues in this appeal

27.  Only two broad issues are raised in this appeal by the defendants:

(1) Was the plaintiff entitled to serve the Notice on 10 February 2017 under clause 2(d) to sell back the Shares to the Company?

(2) Was the plaintiff entitled to serve the Notice on 10 February 2017 under clause 2(e) for a cash payment instead?

28.  There is no dispute that these clauses are mutually exclusive. In gist, the defendants’ contention is that for the plaintiff to make an election under clause 2(d), he needed to be a shareholder. And if he should make an election under clause 2(e) instead, he needed to have transferred his beneficial ownership in the Shares in a Third-Party Buyout as part of a sale “by way of tag-along or drag-along rights acquired as a result of signing the [Shareholders Agreement]”.

Rights under clause 2(d)

29.  Mr Douglas Clark’s submissions for the defendants may be summarised as follows:

(1) At the time of the Notice on 10 February 2017, the plaintiff has already transferred the Shares to CBD. As he was not a shareholder at the time of service of the Notice, he was not in a position to sell back any of the Shares to the Company or its nominee and therefore cannot invoke the rights under clause 2(d).

(2) The judge (following the recorder)[13]cited no authority in holding that the plaintiff retains the beneficial interest in the Shares because CBD has not paid for them and hence the plaintiff is in a position to transfer the Shares to the Company as CBD holds the Shares on constructive trust for the plaintiff and is obliged to return the Shares to him. Neither the recorder nor the judge cited any legal principle or authority for this holding, which is clearly wrong in law.

(3) There is evidence of clear intention that the parties have formed a binding contract to transfer the legal and beneficial ownership of the Shares on completion by providing for payment of a nominal consideration, see supplemental agreement to amend the terms of the SPA on 4 December 2015. The plaintiff was not therefore the beneficial owner. In a valid contract for sale, the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser[14].

30.  Mr Thomas Wong for the plaintiff argued that it is irrelevant that the plaintiff did not hold the legal title of the Shares at the time the Notice was issued. There is nothing in clause 2(d) or any other provision that requires the plaintiff to hold the legal title when he issued the Notice under clause 2(d). He contended that even if the plaintiff did not hold the legal title at the time, it does not follow he would not be able to transfer the Shares to the Company or its nominee when such obligation arose three months after the issuance of the Notice.

31.  Mr Wong further submitted that even though the plaintiff did not legally own the Shares at the time of the Notice, he would have been entitled to recover the Shares from CBD on the ground of total failure of consideration. This was demonstrated by an email of the solicitors of CBD to the plaintiff’s solicitors on 2 November 2017 (after the Notice) stating that “CBD is agreeable in principle to cooperate with the parties in transferring the Retained Shares within the perimeters of the Unwind Deed. If [the plaintiff] decides to sign up for the arrangement under the Unwind Deed, he can refer to the mechanics set out in the deed and proceed accordingly.” The plaintiff executed the Unwind Deed subsequently in 2022[15].

32.  Mr Wong did not cite authority to support the holding that the plaintiff retains the beneficial interest in the Shares because CBD has not paid for them and that CBD holds the Shares on constructive trust for the plaintiff and is obliged to return the Shares. He did not defend this holding in light of the authorities mentioned below.

33.  We do not think this holding is right. The undisputed evidence is that the plaintiff had transferred the Shares to CBD on 28 January 2016, as D3 had done, and CBD became the majority shareholder in the Company and the Company was run and controlled by CBD. The beneficial interest in the Shares had passed to CBD. The fallacy in the holding is that where there is total failure of consideration, the beneficial interest re-vests in the vendor. Neither the O 14A Decision nor the O 14 Decision has explained the legal basis for re-vesting the beneficial interest of the Shares in the plaintiff upon total failure of consideration; by what system of law, whether under the law of contract or the law of restitution; whether the re-vesting was during the subsistence of the SPA or upon the termination of the SPA, for instance by acceptance of repudiatory breach.

34.  There is no support and no legal basis for the holding. We have been referred by Mr Clark to Lysaght v Edwards and Okachi (Hong Kong) Co Ltd. Other relevant authorities have been analysed in a recent judgment of the Court of Appeal in Ho Wai Kwong, executor of the estate of Yu King, deceased v Ho Kam Chui [2025] HKCA 174 at section G of the judgment. These authorities included: McDonald v Denny Lascelles Ltd (1933) 48 CLR 457 at 476 to 477, per Dixon J[16]; Pan Ocean Shipping Co Ltd v Creditcorp Ltd (The Trident Beauty) [1994] 1 WLR 161 at 164B to E, per Lord Goff; Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at §§89 to 100, per Ribeiro PJ; Barton v Morris [2023] AC 684 at §191, per Lord Leggatt; Goff & Jones on Unjust Enrichment (10^th ed, 2022) at §3-15.

35.  In summary, where the beneficial ownership has passed to the purchaser, as an unpaid vendor having a right to the purchase money, the plaintiff has a lien in equity for the purchase price over the Shares contracted to be sold. This lien only functioned as a charge on the Shares as security for the purchase money, it did not operate to re-vest the beneficial interest of the Shares in the plaintiff.

36.  Assuming the SPA was terminated for breach (there is no evidence it was terminated at the time of the Notice), the termination does not operate as a rescission ab initio and negative the historical subsistence of the contract to denude the transfer of property made during the currency of the SPA of all legal basis. Rights are not divested or discharged which have been unconditionally acquired. Having transferred the Shares to CBD, the plaintiff had an accrued right to the purchase price enforceable by an action in debt. Rights and obligations which arise from the partial execution of the SPA and causes of action which have accrued continue unaffected by the termination. The rights and liabilities of the plaintiff and CBD are governed by contract, there is no need or scope for bringing in the law of restitution.

37.  Assuming the SPA was not terminated at the time the Notice was served, the subsisting contract determines and governs the rights and remedies the contracting parties have in relation to the subject matter of the contract and precludes a claim in restitution.

38.  This being an application for summary judgment, the court needs to be satisfied there is no arguable defence or triable issue to the right of the plaintiff to invoke clause 2(d). We cannot be so satisfied, as there is no legal basis for holding that the beneficial interest in the Shares re‑vested in the plaintiff such that he would have been entitled to recover them from CBD and in a position to sell them to the Company pursuant to clause 2(d).

39.  In any event, we have reservations whether the Notice was in substance an election to exercise the rights under clause 2(d). The Notice informed the Company of the plaintiff’s “decision to elect to receive a cash payment calculated in accordance with sub-clause 1”. There is no sub-clause 1 in clause 2(d), there is one in clause 2(e)(iii). Clause 2(e)(iii) provided that the plaintiff may “elect to forgo any future earn-out rights which [he] may acquire as part of the Third-Party Buyout in return for a cash payment equal to the formula in sub-paragraph (1) below”. The Notice seemed to track the wording of clause 2(e)(iii), it went on to state that based on the formula, the cash payment was US$1,000,000. It would appear that the plaintiff had purported to exercise the rights under clause 2(e)(iii) by the Notice. Mr Clark agreed with this when it was pointed out to him.

Rights under clause 2(e)(iii)

40.  The defendants emphasised these opening words in clause 2(e)(iii):

“If any relevant transaction occurs by which the shareholders of the Company (including yourself, whether by way of tag-along or drag-along rights acquired as a result of signing the shareholders’ agreement pursuant to clause 2(c) of this Schedule 2) agrees [sic] to surrender, transfer, or otherwise beneficially assign their interests in the shares of the Company to a third-party (the ‘Third-Party Buyout’) …” (Emphasis added)

41.  As mentioned, a third-party buyout did occur in that the SPA was entered into for the sale of 85% of the shares to CBD and that the plaintiff was separately legally advised during the negotiation process of the sale and purchase.

42.  The defendants contended that clause 2(e)(iii) only applies if the plaintiff sold his beneficial interest in the Shares as a result of his “tag-along” or “drag-along” rights provided for in clauses 9.6 and 9.7 of the Shareholders Agreement. Properly construed, “Third-Party Buyout” as defined in the opening words referred to a third-party buyout that occurs by way of “tag-along” or “drag-along” rights. Hence, the option in clause 2(e)(iii) does not apply if the Shares were sold in some other way, including voluntary sale negotiated and agreed by the plaintiff.

43.  The argument is that the words in parenthesis emphasised above in clause 2(e)(iii) makes “eminent commercial sense”. Where “tag-along” or “drag-along” rights are exercised, the selling shareholder has no control over the terms of the share sale agreement[17], and would not be in a position to negotiate terms to protect his interests. So the clause provided for certain payments to be made in the event the plaintiff sells the Shares under the “tag-along” or “drag-along” provisions. The wording in parenthesis was added to make clear that the plaintiff’s rights are limited to the situations specified. In contrast, in a voluntary agreed sale, the selling shareholder is in a position to negotiate terms, as the plaintiff did in this instance.

44.  Mr Clark added that the words “whether by way of tag-along or drag-along rights” were inserted for a purpose, namely, to achieve the commercial objective as identified above. If it had been intended that the third-party buyout would not be confined to the exercise of “tag-along” or “drag-along” provisions, these material words in the brackets would have been left out and the opening words would read instead: “If any relevant transaction occurs by which the shareholders of the Company (including yourself, as a result of signing the shareholders’ agreement pursuant to clause 2(c) of this Schedule 2) agrees [sic] to surrender, transfer, or otherwise beneficially assign their interests in the shares of the Company to a third-party (the “Third-Party Buyout”)”.

45.  We do not see any ambiguity in the opening words of clause 2(e)(iii) including the words in parenthesis. This provision has been considered twice in the Court of First Instance. We agree with the recorder and the judge that the meaning of the words in parenthesis is clear. The Third-Party Buyout is a transaction that occurs by which “the shareholders of the Company … agrees [sic] to surrender, transfer or otherwise beneficially assign their interests in the shares of the Company to a third-party”. The words in parenthesis – “(including yourself, whether by way of tag-along or drag-along rights acquired as a result of signing the shareholders’ agreement pursuant to clause 2(c) of this Schedule 2)” – are inserted to make clear that this would include (not to provide for exhaustively) the situation where the plaintiff as a shareholder exercises the “tag-along” right when he agrees to sell alongside other shareholders, or where the plaintiff is dragged into the third-party buyout when the other shareholders exercise their “drag-along” rights under clause 9.6 of the Shareholders Agreement. We agree with the decisions below that this construction is entirely consistent with business sense.

46.  The words “whether by way of tag-along or drag-along rights” cannot be read as “only if by way of tag-along or drag-along rights”. As the recorder and the judge have reasoned, if it were meant to exclude voluntary agreed sales in a third-party buyout from this provision, clearer wording would be required. One must have regard to the ordinary and natural meaning of the wording of the contract. We do not see the “eminent commercial sense” put forward by Mr Clark as altering the effect of the plain meaning. Nor do we think giving effect to the plain meaning is to ignore the words “whether by way of tag-along or drag-along rights” and would go against the presumption against surplusage.

47.  Mr Clark made the further point that the recorder expressed the view that the words in parenthesis were added “for the avoidance of doubt”[18], but these words “for the avoidance of doubt” do not appear in the opening words of clause 2(e). We think this is of little moment. Even if express words “for the avoidance of doubt” are not used, a provision in the contract may still have this effect.

48.  The recorder and the judge found further support for their construction in sub-clause 2 of clause 2(e)(iii), which reads: “For the avoidance of doubt, and in the event of any dispute, it is the parties’ express intention that the formula in the preceding paragraph preserves a right by you to receive a total sign-on bonus of US$1,000,000 within the term” and goes on to provide that the formula is to “properly account for any consideration (whether upfront payments or earn-out commissions) that may be received as a result of any Third-Party Buyout”. We are inclined to agree. Firstly, there is no reason why the formula to properly account for consideration received as a third-party buyout should apply only to a transaction brought about by “tag-along” or “drag-along” rights and not a voluntary agreed sale. Secondly, as submitted by Mr Wong, sub-clause 2 and clause 7.1 of the Employment Agreement explicitly spelled out the parties’ desire to preserve the plaintiff’s right to receive the Sign-On Bonus in any event.

49.  Lastly, we wish to point out that we have not overlooked the requirement in clause 2(e)(iii) that this right is to be exercised at any point during the period between the completion of the Third-Party Buyout, and the end of the term of the plaintiff’s employment. It is a ground of appeal whether completion had taken place when the Notice was served and had not been adequately addressed in the plaintiff’s evidence. Mr Clark did not pursue this in his written submission although he did not abandon this ground of appeal, nor was this canvassed in Mr Wong’s submission.

50.  We note that the recorder took the view there is no evidence available from the undisputed facts whether the Notice was served before or after the completion of the Third-Party Buyout. We think the available evidence is sufficient to support a finding that completion had occurred by the time the Notice was served on 10 February 2017. By then, the SPA was amended twice to provide for payment of a nominal consideration of US$1 on completion and the “Initial Cash Consideration” was to be paid after completion. The shares sold under the SPA had all been transferred to CBD and it had taken control of the Company as the majority shareholder. Capital reorganisation pursuant to the SPA as amended was completed in November 2016[19]. The plaintiff asserted in his 2^nd affirmation[20] he had been advised by his lawyers that completion of the CBD buyout had taken place when he issued the Notice, and he has “no reason to doubt that the conditions and obligations set out in clause 4.1 and Part A Schedule 4 of the SPA had either been fulfilled or waived.”[21] The defendants should be in the best position to know if this was the case. As pointed out by the judge[22], they did not plead that the Bonus Claim should be dismissed on this basis, nor have they provided any response to the plaintiff’s assertion. It would be appropriate in these circumstances to infer from the available evidence that completion had taken place when the Notice was served.

51.  We agree with the judge there is no arguable defence or triable issue to the Bonus Claim based on the exercise of the rights under clause 2(e)(iii).

Orders and costs

52.  We made these orders at the conclusion of the hearing. We dismissed the defendants’ appeal and ordered the amounts they paid into court on 20 March 2024 to satisfy the condition for stay of execution of the summary judgment be paid out to the plaintiff with accrued interest.

53.  Mr Clark did not oppose the costs of the appeal. We ordered the defendants to pay the plaintiff’s costs of the appeal.