MACPI GROUP (HK) LTD v. YAP BEE HONG CHRISAND

DCCJ 5593/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5593 OF 2007

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BETWEEN

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JUDGMENT

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1.  The Plaintiff (“Macpi HK”) is a limited company registered in Hong Kong carrying on the business of selling garment and lingerie machines manufactured by its Italian parent company Macpi S.R.L. (“Macpi Italy”).

2.  The Defendant was employed by Macpi HK as a general sales manager under an employment contract dated 28 August 2003 (“the employment contract”).

3.  The dispute between the parties arose out of a claim brought by the Defendant (“Ms Yap”) in the Labour Department on 6 March 2007 for the recovery of outstanding commission for 2006 and 2007.  On 12 March 2007, Ms Yap was given a letter of dismissal with immediate effect; she was informed her salary would be paid up to 12 March 2007 with an additional month’s salary (page 21 of bundle C(A)).  She was given a cheque in the total sum of $57,000 representing two months’ salary of $29,000 each after deducting the $1,000 MPF payment (page 23 of bundle C(A)).

4.  Macpi HK settled Ms Yap’s claim lodged with the Labour Department for outstanding commission for 2005 and 2006 by entering an agreement with Ms Yap and paid her a total sum of $260,945 on 12 March 2007.  The agreement was in writing and recorded in the return slip from the Labour Department, Labour Relations Division.  It was signed by Mr. Luca Mosso (“Mosso”), the Director of Macpi HK on 12 March 2007.  In return, Ms Yap signed a receipt accepting the sum of $260,945 in full and final settlement of all civil claims concerning the case against Macpi HK, the employer, in respect of her claim under the Employment Ordinance and the employment contract for the commission up to December 2006.  Ms Yap further agreed to release and discharge the employer from any civil claim on the commission up to December 2006 under the Employment Ordinance and the employment contract in her claim lodged with the Labour Department in March 2007.  The receipt was signed and witnessed by an officer of the Labour Department (page 25 of Bundle C(A)).  Macpi HK admitted the amount of $260,945 was calculated based on figures set out in a spreadsheet prepared by Macpi Italy’s accounts department countersigned by the Director of Macpi HK, Mosso (pages 27 to 28 of bundle C (A)).

5.  As Ms Yap continued her claim for the 2007 commission at the Labour Tribunal, Macpi HK took out proceedings in the District Court against Ms Yap under DCCJ 5593/2007 on 18 December 2007 claiming:

(1)  the sum of the over-payment of US$14,967.61 as commission between 2005 and 2007 to Ms Yap when it settled Yap’s claim at the Labour Department on 12 March 2007;

(2)  the sum of HK$18,000 it had inadvertently overpaid Ms Yap as part of Ms Yap’s salary for the month of October to December 2006;

(3)  the return of the sum of HK$29,000 on the basis it did not realize on 12 March 2007 it was entitled to dismiss Ms Yap summarily without the payment of one-month wage in lieu of notice;

(4)  damages for breach of warranty and indemnity under para. 3(d) of the Statement of Claim for Ms Yap’s breach of employment contract;

(5)  alternatively, HK$19,950 as money had and received by Ms Yap as an increment received by Ms Yap for the months of January, February and March 2007; and

(6)  damages and loss due to Ms Yap’s misconduct resulting in its loss of customers and leaking of confidential information in breach of the employment contract.

6.  Ms Yap denies the claim and counterclaims against Macpi HK for unpaid commission for the year 2007.  

The Defendant’s evidence

7.  The history of Ms Yap’s employment relevant to the present proceedings began in the year 2000 when she was employed by a company called Far East Engineering Technology Limited (“FEET”) on 14 September 2000.  According to the letter of employment dated 23 August 2000 (pages 163 to 164A of bundle C(B)), Mosso was the director of FEET, Ms Yap was employed as a shipping clerk, bookkeeper and secretary for $18,000 per month.  She received a salary increase to $20,000 per month at the end of the first six months and a Chinese New Year bonus of one month salary.  She was further required to visit Europe at least once a year for training.  She claimed when she was working at FEET as a shipping clerk and secretary handling shipping and other documentations, she was effectively working for Elena Carttabia and companies related to Macpi Italy because under clause 11 of her FEET employment agreement, her job duties included also the companies related to FEET (page 164 of bundle C(A)).  According to Ms Yap, they were Far East Honest Limited, New Horizon, Westson and Quantock. 

8.  It was Ms Yap’s evidence that she was introduced to Mr. Armando Raccagni (“Raccagni”) while she was on a training trip to Italy in September 2000 and she was told by Elena to report to and work with Raccagni.  Since September 2000, she had been working with Elena, Mosso and Raccagni whom she regarded as “Macpi people”, they were her bosses and colleagues. 

9.  In January 2001, Elena told her that Macpi Italy wanted to set up a company in Hong Kong with a local person as the director.  Ms Yap was asked to be a director of Quantock together with Raccagni and she was told to sign papers in relation to the setting up of Quantock in Hong Kong.  She was given an employment letter appointing her as the general sales manager on 2 January 2003 by Quantock International Limited.  It stated her employment would commence on 1 January 2003 and she would be paid a monthly salary of $10,000 with a commission of 2% on related commercial invoices handled by her which would be paid to AT KUL Sdn. Bhd, Malaysia every 6 months.  She would further be paid a discretionary Chinese New Year bonus of one month salary each year.  Again, clause 11 of the employment letter stated her job duties would include also the companies related to Quantock International Limited (pages 165 to 166 of bundle C(B)). On 28 August 2003, she was given a letter of termination and transfer by Quantock International stating that her employment contract would be terminated with effect from 31 August 2003 due to ‘switch of management organisation’. The letter was signed by Raccagni (page 167 of bundle C(B)).  On the same day, 28 August 2003, she was given an employment letter by Macpi HK signed by Mosso (page 11 bundle C(A)).  The letter stated:

“This contract will replace the previous one signed with Quantock International Limited and we are pleased to offer you the same conditions as before.

Moreover any fee you will be charged to the MPF transfer will be refunded by Macpi. ...”

10.  Under clause 3 of the employment contract with Macpi HK, Ms Yap’s basic salary was increased to $20,000 per month, but her sales commission was reduced to 1.5% for business and sales generated by her with the provision that it would be payable after deduction of the first US$500,000 of sales. 

11.  Clause 7 of the employment letter further set out the special staff regulations.  They were:

“(a) Members of the staff must at all times keep secret the affairs of the company and of its suppliers, customers and all business partners.

  (b)      No members of the staff shall undertake any part-time employment or business without the prior written consent of the company.”

12.  The special staff regulations were not new to her for they were also specified in her previous contracts with FEET and Quantock.  Furthermore, clause 10 of the 28 August 2003 employment contract with Macpi HK was similar to clause 11 of her contract with FEET in 2000 and Quantock in January 2003 that her job duty included the companies related to Macpi Group (H.K.) Limited while the contract with FEET referred to FEET and the companies related to it.  In her employment contract with Quantock, it referred to Quantock and the companies related to it.

13.  Ms Yap claimed that before she commenced working for Macpi HK, she was working for Elena whom she believed is the owner of Macpi Pressing Division SPA and the parent of Macpi HK which was incorporated in July 2003.  As she was instructed by Elena to be a director of Quantock, she believed Quantock was a company funded and beneficiary owned by Elena.  All along, she was required by Elena to report to and introduce customers to Reccagni.  Furthermore, the office of FEET, Quantock and Macpi HK were all located at the same address at Suite 4, 18^th Floor, Tower 1, China Hong Kong City, 33 Canton Road, Tsim Sha Tsui before August 2006.  She further claimed that Mosso was rarely at the Macpi HK office having relocated to Italy and Raccagni was more often found at the office in Hong Kong.

14.  Ms Yap claimed that after Macpi HK was incorporated, Raccagni began working under a company called Westson International Limited (‘Westson”) which she believed was another sales arm of the Macpi Group.  Elena had instructed her to work closely with Raccagni as Mosso was not actively involved in Macpi HK’s operation or the Mainland China operation at the time.

15.  Ms Yap said she had worked hard since the early days to procure the initial sales in Hong Kong for Macpi lingerie machine industry because Macpi Italy was not a recognised name in the underwear/lingerie industry in Hong Kong at the time.  It was her understanding when Macpi Group (H.K.) Limited was incorporated, it would replace all other local companies under the same group of Macpi.  At the suggestion of Mosso, she put forward AT KUL Sdn. Bhd. (“AKSB”) as her receiving agent company for $10,000 of her $20,000 monthly salary for tax planning purpose and for future commission payments. 

16.  She claimed she took up duties which were not part of the job descriptions of a general sales manager.  She translated machine catalogues, drafted contracts in Chinese, booked hotels and acted as an interpreter for technicians from Macpi Italy when they visited Hong Kong and China.  Sales for Macpi machines grew because of her work in securing customers for Macpi HK so much so that Mosso instructed her to concentrate on generating new customers and entrust her colleagues at Macpi HK to follow up the orders placed by customers she brought to Macpi HK.  She claimed she had regularly reported and provided useful information to Macpi HK for the enhancement of its reputation and business.  These included information and report given to Elena, Raccagni and Mosso.  She often attended dinners with customers when she was free even though it was not mandatory under her contract.

The Plaintiff’s evidence

17.  Mosso agreed he is the managing director and is fully responsible for the operation and management of Macpi HK.  He admitted the accounts and financial matters of Macpi HK were handled by the accounts department of Macpi Italy under the management of Mr. Ferrandi, the former group financial director.  Upon the departure of Mr. Ferrandi, Ms Elena Carttabia (“Elena”) was put in charge of the accounts department of Macpi HK’s parent company Macpi SRL (“Macpi Italy”).

18.  Mosso admitted Macpi HK was set up with the purpose of developing the business of Macpi in Asian countries and Mainland China selling products of garment and lingerie machines.  Macpi HK has four members of staff including himself, an office manager, a sales manager and an accounts staff.

19.  Mosso disagreed with Ms Yap’s claim that she took the initiative in providing useful information and report on matters which would enhance the business and reputation of Macpi HK to Elena and himself.  He denied Macpi people included Raccagni.  He pointed out Ms Yap was not authorised to divulge confidential information on Macpi HK to outsiders which may damage the business opportunities and reputation of Macpi HK.  He claimed Quantock International Limited and Westson International Limited were considered outsiders by Macpi HK.  He denied he had ever given Ms Yap the authority to divulge confidential information of Macpi HK to these companies, he further denied Elena had told Ms Yap to report to or introduce customers to Raccagni, Quantock, Westson or anyone else.

20.  Mosso denied Raccagni was an employee or an officer of Macpi, he was not entitled to take part in the management and operation of Macpi HK.  He admitted Macpi HK had traded with Raccagni and his companies, Quantock and Westson, for a long period of time and that Raccagni and his companies had regularly placed orders for Macpi products.  He claimed that was the reason why Raccagni was a frequent visitor at the Macpi HK office.  Even though Raccagni was his personal friend, Mosso denied he had a close business relationship with him.

21.  When Macpi HK was first established in July 2003, Mosso admitted it was Raccagni who suggested the employment of Ms Yap as its sales manager.  Relying on his close personal relationship with Raccagni, he accepted the recommendation.

22.  At the time of signing the employment contract, Ms Yap requested her commission to be paid to AKSB.  He claimed she had explained and warranted to him it was legal and would help her with making arrangements to remit money to her family in Malaysia.  She had agreed to indemnify Macpi HK for any loss, damage and expenses sustained by Macpi HK in the arrangement.  Mosso denied it was done on his suggestion for tax purpose.

23.  In January 2007, Ms Yap requested a variation of her employment contract.  The revision was made on 22 January 2007 and the Plaintiff claimed it was accepted by Ms Yap by her email of 28 February 2007.  The variation consisted of the following:

(a)  The basic salary was revised to HK$29,000 per month, $16,000 in the form of consultancy fee payable to AKSB and the remaining $13,000 as salary payable to Ms Yap directly.

(b)  a commission based on the invoice price of products sold after deducting charges for packing and freight.  Further, it was agreed that:

(1)  The commission is calculated on a quarterly basis;

(2)  No commission is payable on the first Euro 500,000 of sales;

(3)  Sales between Euro 500,001 and Euro 1,000,000, commission is payable at 1.25%;

(4)  Sales between Euro 1,000,001 and Euro 1,500,000, commission is payable at 1%;

(5)  Sales between Euro 1,500,001 and Euro 2,500,000, commission is payable at 0.75%;

(6)  Sales between Euro 2,500,001 and Euro 3,500,000, commission is payable at 0.5%;

(7)  Sales above Euro 3,500,000, commission is payable at 0.35%.

24.  Mosso admitted that the negotiations over Ms Yap’s salary and commission began in early October 2006 when Ms Yap asked for a higher basic salary and the commission to be calculated on quarterly basis instead of every six months as she would like to receive her money earlier to meet her financial needs (para. 24 of Mosso’s 28 August 2008 witness statement).  Consequently, between October and December 2006, Macpi HK paid a monthly sum of $16,000 into Ms Yap’s AKSB account as consultancy fee and part salary.  A total sum of $48,000 was therefore paid to AKSB on 31 October, 30 November and 30 December 2006.  Macpi HK claimed that if there was no revision of Ms Yap’s contract remunerations, she was overpaid $18,000 in total.  Macpi HK relied on Ms Yap’s offer and agreement to repay the overpayment in her 28 February 2007 email to Mosso.

25.  On the over-paid commission to Ms Yap, the Plaintiff claimed that Ms Yap was paid a total of US$69,689.40 consisting of the following:

Date	Amount
Excess of payment for 2005 commission	US$5,398.52
3rd October 2006 (HK$141,488)	US$16,187.47
28th November 2006 (HK$50,000)	US$6,449.30
7th February 2007 (Euro 6,292.40)	US$8,312.89
12th March 2007 (HK$260,945)	US$33,341.22
Total	US$69,689.40 ============

26.  Macpi Italy has a centralised accounting system, its accounts department looked after accounting and financial matters of all of Macpi subsidiaries including Macpi HK; it was also responsible for compiling the commission entitlements of each staff in all of the Macpi companies based on sales orders and shipping information submitted to Macpi Italy.  According to Mosso, Macpi HK was advised by its lawyers on 24 September 2007 that Macpi Italy had wrongly calculated Ms Yap’s commissions by applying the US$500,000 threshold on an annual basis rather than a semi-annual basis.  Macpi HK consequently claimed Ms Yap was overpaid commissions for 2005 and 2006 amounting to US$14,967.61 when Macpi HK settled Ms Yap’s claim for commission up to December 2006 at the Labour Department on 12 March 2007. 

27.  Elena admitted the Macpi HK’s accounts staff would prepare the daily accounting records and communicate with the Italian accounts department directly.  When Sally Cheung of Macpi HK requested the Macpi Italy accounts staff to compute the commission payable to Ms Yap on or about 8 March 2007 after Ms Yap lodged her claim at the Labour Department for the balance of her commission in 2006, it was calculated at the original rate of 1.5% instead of the revised commission rate which was to take effect in the last quarter of 2006.  It was only in late September 2007 that Macpi Italy’s accounts department was requested by Macpi HK to recalculate Ms Yap’s commission.  She claimed the Italian accounts staff had been computing Ms Yap’s commission on an annual basis because the Italian staff had never seen Macpi HK’s employment contract with Ms Yap and had no knowledge of the basis of Ms Yap’s commission under her employment contract.

28.  Elena denied she is a shareholder of Macpi SRL, she claimed she had no interest in Quantock International or Westson International Limited or that she had ever been a director or a shareholder of these two companies.

Analysis

(1)       The over-payment of 2006 commission claim

29.  The Plaintiff is claiming for the return of an over-payment of US$14,967.60 on the Defendant‘s 2005 and 2006 commission due to a mistake in computation.

30.  The Plaintiff claimed the 2005 and 2006 commission was computed on records submitted by Ms Yap on the annual sales orders handled by her on 2005 and 2006. Further, the over payment was due to a misunderstanding of the basis of Ms Yap’s commission in the last quarter of 2006 and the mistaken understanding of the terms of her employment contract on the part of Macpi Italy’s accounts department.  The Plaintiff further claimed the mistaken payment was induced by the misrepresentation of the Defendant.

31.  The payment of $260,945 made on 12 March 2007 was a result of an agreement reached between Macpi HK and Ms Yap.  The director of Macpi HK, Mosso, signed an acknowledgement of the agreement (page 24 of bundle C(A)) and Ms Yap signed the receipt in full and final settlement of her claim against Macpi HK for the outstanding 2006 commission (page 25 of bundle C(A)).  The cheque for the payment of $260,945 dated 12 March 2007 was issued by Macpi HK (page 26 of bundle C(A)) based on calculations by the accounts department of Macpi Italy (page 27 of bundle C(A)).  Macpi HK is effectively claiming for the return of part of the payment made under a compromise/settlement of the claim lodged by Ms Yap against Macpi HK.  Macpi HK further alleges the payment was made under a mistake of fact and of law and asks for the return of money had and received claiming Ms Yap was unjustly enriched by the payment of the settlement sum. 

32.  In order to succeed, the Plaintiff has to overcome the hurdle that the payment was made under a compromise in settlement of a Labour Department claim lodged against it by Ms Yap and the legal principle under unjust enrichment that even if a ground of restitution is established, relief will nevertheless be denied if the recipient has a recognised defence. 

The Law on Compromise

33.  Under the law, a payment made under a compromise to settle an honest claim is not recoverable even though the paying party later discovered upon enquiries of the details of claimant’s claim.  Para.1-069 of Goff & Jones’s Law of Restitution 17^th edition page 59 stated :-

“Compromises. The claimant confers a benefit on the defendant, in pursuance of the defendant’s honest claim and with the intention of compromising that claim. The general principle is that the claimant’s restitutionary claim must fail. The general rule is that the compromise cannot be set aside, whether or not the claim was accompanied by the threat of legal proceedings.

A person upon whom a claim is made is not allowed to choose his own time for litigation. The courts lean in favour of settlements, and to allow a party to reopen a transaction of this kind serves to promote rather than to allay disputes. It would be “against public policy” to reopen the transaction unless the defendant has “taken an unfair advantage or acted unconscientiously, knowing that he had no right to the money.” However, a payment made as part of a compromise is generally irrecoverable as a general rule. As Lord Hope said in Kleinwort Benson Ltd v Lincoln City Council:

“Brennan J., in [David Securities Pty. Ltd v. Commonwealth Bank of Australia] said that, where a claim is satisfied by accord and satisfaction, a payment made in satisfaction is made in discharge of an obligation created by the accord; it is unaffected by any mistake as to the validity of the compromise.  That must be so, irrespective whether the mistake is as to the facts or the law regarding its validity.”

A court should then be slow to set aside compromises on the ground of mistake “as to the validity of the compromise.

In the words of Gibbs J. : “Where a man demands money of another as a matter of right, and that other, with a full knowledge of the facts upon which the demand is founded, has paid a sum, he can never recover back that sum he has so voluntarily paid.” The test is whether “the money is intentionally paid without reference to the truth or falsehood of the fact, ….. meaning to waive all inquiry into it, and that the person receiving shall have the money at all events, whether the fact be true of false.” If so, the payment is voluntary and can be retained by the defendant, even though the fact in question is different from what the claimant believed it to be.”

34.  Paragraph 29-038 of Chitty on Contracts, vol.1, 13^th ed. stated:

“Money paid in discharge of a genuine legal obligation cannot be recovered merely because the payer was induced to fulfil his legal obligation by a mistake.  As Lord Hope stated, “The payee cannot be said to have been unjustly enriched if he was entitled to recover the sum paid to him.”

                   Paragraph 29-039 of Chitty on Contracts, further stated:

“Other bars to recovery. Payments made in submission to a claim and under compromises are normally irrecoverable. If parties agree in good faith to compromise a disputed claim, the compromise is binding, even though the claim might in fact be without proper foundation.”

The background to the Plaintiff’s claim of mistaken payment

35.  Mosso and Elena admitted it was after receiving the advice of Macpi HK’s lawyers in September 2007 that the claim for overpayment of the 2006 commission was raised when Ms Yap continued to pursue her 2007 commission against Macpi HK at the Labour Tribunal.  In October 2007, Macpi HK applied to transfer its counterclaim against Ms Yap at the Labour Tribunal to the District Court. When the application was rejected by the Labour Tribunal, Macpi HK lodged a separate claim at the District Court under DCCJ 5593 of 2007 on 18 December 2007.  Eventually, Ms Yap’s Labour Tribunal claim was transferred to the District Court as DCCJ 605 of 2008 on 24 January 2008, it was consolidated on the order of Master C. Lee on 28 February 2008 with DCCJ 5593 of 2007.

36.  Mr. Lee, counsel for the Plaintiff, submitted that in addition to the mistake of fact, the overpayment was made under a mistake of law on the part of Mosso and Elena.  The mistake of fact, the Plaintiff claimed, was because the accounts department at Macpi Italy had failed to compute Ms Yap’s commission for 2006 in accordance with her employment contract for the first 9 months of 2006, and from the 4^th quarter of 2006 to 2007, it should have applied Ms Yap’s new terms of employment by deducting the threshold limit of Euro 500,000 on a quarterly basis against the sales orders obtained by her. 

37.  The Plaintiff argued that on the basis of clause 3, the employment contract should be construed as applying the sales threshold of US$500,000 every six months rather than annually, when Ms Yap requested for the commission to be paid to her quarterly based on quarterly sales figures, the threshold sales of Euro 500,000 should be applied quarterly.  Based on the aforesaid, the “mistake” claimed was a mistaken construction of the employment contract.  

38.  The Plaintiff further alleged the mistaken over-payment was due to Ms Yap’s misrepresentation by submitting her own commission statement to her employer in March 2007 (pages 196-198 bundle C(A)).  The Plaintiff argued, due to Ms Yap’s misrepresentation and failure to correct the mistakes made by Macpi Italy’s accounts department, Macpi HK was misled into giving more credit to Ms Yap than she was entitled to.

Overpayment due to a mistake of law

39.  In paragraph 29-041 of Chitty on Contracts, the authors said:

“Mistake of law: formerly not a ground for restitution. Despite a dubious legal foundation and the difficulty of drawing any clear dividing line between “law” and “fact” for many years, as a general rule money paid under a mistake as to the general law, or as to the legal effect of the circumstances under which it is paid, but with full knowledge of the facts was irrecoverable. The rule reflected concern to protect security of receipts, especially in the absence of a defence of change of position.”

40.  On the Plaintiff’s claim that the over-payment was made due to a mistake of law; the allegation does not involve the understanding or misconstruction of a statute or a mistaken view of regulations issued under statutory authority or a mistake as to the effect of general rules of common law or of equity. 

41.  Clause 3 of Macpi HK’s 28 August 2003 employment contract with Ms Yap (page 11 of bundle C(A)) stated:

“A basic salary of HK$20,000.00 per month will be paid to you and sales commission of 1.5% for business and sales generated by your action and based on commercial invoices. The commissions will be recognising starting from US$500,000.00 and will be paid to AT KUL Sdn Bhd., Malaysia every 6 months. The Company has the right to ask you to participate to seminar, exhibition, and/or visit customers in all Far East.”

42.  The relevant part is in the second sentence of clause 3, it stated that Ms Yap would be paid a commission after the first US$500,000 sales and she (through her nominated company, AT KUL Sdn. Bhd.) would be paid every 6 months.  It is not disputed that Ms Yap’s commissions for 2005 and 2006 had been settled based on calculations made by Macpi Italy’s accounts department in 2005 and 2006 on the basis that the threshold for commission for sales after the first US$500,000 was applicable annually.  Because Ms Yap had wanted an early settlement of the balance of her 2006 commission, she requested for the final accounts and settlement in early 2007.  It was on the same basis of calculation that Macpi HK reached a settlement with Ms Yap and paid her the sum of HK$260,945 after signing an agreement to settle the claim lodged by Ms Yap at the Labour Department on 12 March 2007.  It follows, therefore, the mistake was a mistake of fact rather than a mistake of law.  

43.  Even if the payment was made under a mistake of law, it is not recoverable if the payment was made on an erroneous assumption of the law.  Para. 29-196 of Chitty on Contacts page 1957 stated:

“Settlement of an honest claim.  A payment that is made in settlement of or submission to an honest claim, or as part of a compromise, cannot be recovered.  Since greater doubts surround questions of law than questions of fact it is more likely that there will be a settlement or a compromise where the issue is one of law rather than one of fact.  Although it has been stated that the precise limits of the settlement defence “have still to be clarified”, the current position can be stated in the following way.  First, where the payer knows or believes the money is not due but pays in any event, the money will not be recoverable on the ground of mistake.  If a claim has been made and disputed but payment eventually made, whether in order to avoid threatened litigation or for some other reason such as to preserve good commercial relations or to secure some advantage, it will either be a compromise or a contractual submission to the claim.  If there has been no overt dispute, the reason for irrecoverability may be more difficult to characterise as submission and is better analysed as waiver.  In any event in such cases there is no mistake.

Payer has doubts but nevertheless pays.  Where the payer has doubts but pays nevertheless, he is unlikely to be able to recover the payment:

“….. a state of doubt is different from that of mistake. A person who pays when in doubt takes the risk that he may be wrong.”

Three situations must, however, be distinguished.  First, if the payee has made a claim accompanied by a threat to sue, recovery will be denied.  Secondly, where there has been no overt dispute, if the payer does not care which way that doubt is resolved but consciously makes a decision to pay, there will also be no recovery.”

44.  In para. 29-189 of Chitty on Contracts, it further stated:

“Compromise. Recovery will also be denied if there has been a compromise of the claim. A compromise involves some degree of concession (or consideration) on each side, and this can include the forbearance to sue. Again, it may be binding regardless of the validity of the claim. This, of course, assumes that in cases where the only pressure on the party who makes the payment is the probability of being sued, the claimant bona fide believes he has a fair chance of success. A compromise may be invalidated by a mistake, but not where the compromise was agreed on the basis of an erroneous assumption about the law.”

Over Payment due to a mistake of fact and misrepresentation

45.  Ms Yap’s employment dealing with the sale of Macpi machinery dated back to September 2000 when she was first engaged by FEET, its director was Mosso.  Her remunerations at FEET did not carry any sales commission.  In early January 2003, Ms Yap was asked by Elena to be a director of the newly incorporated Quantock International Limited with Raccagni as the other director.  Her employment letter stated her duties would cover all activities related to sales; she was entitled to 2% commission on all commercial invoices handled by her and her basic salary was reduced to $10,000 per month from the previous $20,000 when she was employed by FEET.

46.  On 28 August 2003, she was given an employment termination and transfer letter that stated her employment was transferred to Macpi Group (H.K.) Limited.  She was given a letter of employment by Macpi HK of the same date.  Clause 3 of the 28 August 2003 employment contract stated that her basic monthly salary would be $20,000 and her sales commission would be 1.5%.  The difference in the commission payment between her employment contract with Quantock and Macpi HK was the Macpi HK contract provided the commission would only be payable after deduction of the first US$500,000 of sales generated by her.  Both contracts provided the commission would be paid every six months.

47.  It was based on the aforesaid terms that Ms Yap was employed since September 2003. It was also on the same basis that her 2004 and 2005 sales commissions were computed.  She did not receive any commission for the year 2003 and 2004 because the sales orders in 2003 and 2004 did not exceed US$500,000.  The 2005 commission was taken in to account when the first instalment of her 2006 commission was calculated based on sales orders set out on the invoices issued by Macpi Italy for orders generated and handled by her after the deduction of the annual threshold figure of US$500,000.  In 2006, she found certain missing sales orders in the commission spreadsheet compiled by Macpi Italy’s accounts department, she raised the matter with Mosso and Elena in her emails to both of them at the end of 2006 and early 2007.  In Mosso’s October 2006 email reply to her, he agreed to adjust her commission for 2006 to include the sales orders omitted by Macpi Italy.

48.  I find the evidence adduced by the Plaintiff failed to support its claim that the overpayment was due to a mistake of fact or Ms Yap’s misrepresentation of her sales record.  Macpi HK relied entirely on Macpi Italy to prepare all of Macpi HK’s accounts.  All documents of sales were submitted to Macpi Italy by Macpi HK for the accounts to be prepared.  There can be no mistake of the orders placed for Macpi HK acted as a sales office of Macpi Italy.  Customers placing orders for lingerie or garment machines through the sales staff at Macpi HK would have their orders transmitted to Macpi Italy for the machinery to be manufactured.  All documents for sales generated by Ms Yap would have been sent to Italy for execution and the machines to be built.  Consequently, Macpi Italy’s accounts department, when calculating the commission payable to Ms Yap must be in possession of all orders placed by her customers, it should have ample time to verify from its own records the sales records submitted by Ms Yap in 2007 for sales completed in 2006.  

49.  Furthermore, sales commissions would only be payable after the machines were manufactured, shipped and delivered to customers in Hong Kong, China or other parts of Asia. Macpi Italy’s accounts department would then issue invoices for the machines manufactured and delivered including freight and packing charges to its customers.  After customers settled payments, Macpi Italy’s accounts department would work out the commission payable to each sales person.  In the case of Ms Yap, as the only staff at the Hong Kong office who received sales commission, it would not be difficult for Macpi Italy’s accounts department to work out her commission for 2005 and 2006 based on her contract commission terms.  Ms Yap’s commission terms were completely different from Macpi Italy’s sales persons in Europe, it was calculated in US dollars and the commission payable was based on a flat rate of 1.5% after applying the threshold of US$500,000 of sales generated by her.  It is therefore inconceivable for Macpi Italy’s accounts department headed by Elena, who is also a director of Macpi HK, to have made a mistake in calculating the 2006 commission payable to Ms Yap in March 2007.  In Mosso’s email of 18 November 2005 sent from Italy in response to Ms Yap’s request to Elena for an early settlement of her commission in 2005, Mosso mentioned he had consulted Elena.  The email stated that Elena had personally worked out the commission payable to Ms Yap and had delivered the calculations to Mosso before he sent his email reply to Ms Yap (pages 158-159 of bundle C(B)).

50.  Mosso, the director of Macpi HK, was Ms Yap’s direct superior.  He had accepted the calculations by signing on the spreadsheet prepared by Macpi Italy acknowledging the accuracy of the spreadsheet figures and approving the payment of the $260,945 commission to Ms Yap on 12 March 2007.  If he did not accept those were the correct figures for the correct sales orders generated by Ms Yap, he would not have countersigned the spreadsheet and authorised the payment.  

51.  Furthermore, the agreement was recorded at the Labour Department as a settlement by both parties of Ms Yap’s commission up to December 2006.  Under the law, the compromise to and payment of Ms Yap’s claim against Macpi HK for commission up to December 2006 voluntarily entered into by Macpi HK is irrecoverable even though it subsequently discovered it had made a mistake in calculation at the time of the settlement.  Macpi HK, in claiming for the return of part of the payment made under an agreement to settle the claim lodged by Ms Yap at the Labour Department in March 2007, is seeking to re-open Ms Yap’s Labour Department claim.  The Plaintiff admitted it was on the advice of its legal advisors six months after the settlement that it decided to take out fresh proceedings in the District Court.  Not only did the Plaintiff fail to apply for the setting aside of the settlement agreement at the Labour Tribunal, it has also failed to ask for the 12 March 2007 settlement agreement to be set aside in the prayer of the Statement of Claim in the present action.  On the aforesaid basis, the Plaintiff’s claim for recovery of payment made under a settlement is rejected.

Clause 3 of the employment contract

52.  I turn to the interpretation of clause 3 of the employment contract for the purpose of the Plaintiff’s remaining claim and the Defendant’s counterclaim and also in the event that I should be wrong in my application of the law of compromise above.  The general principles on interpretation of contracts have been laid down by Lord Hoffmann at page 114 of Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 All England Law Reports 98:

“The principles may be summarised as follows:

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the ‘matrix of fact’, but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax (see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352, [1997] 2 WLR 945.

(5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Cia Naviera SA v Salen Rederierna AB, The Antaios [1984] 3 All ER 229 at 233, [1985] AC 191 at 201:

‘….. if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.’”

53.  The employment contract contained a number of typographical/grammatical and syntactical errors.  I attribute these to the drafter’s oversight or he/she was unfamiliar with the precision required in drafting contracts in English.  The reference in clause 3 of the commission payable indicated it will be paid after deduction of the first US$500,000 (of sales).  The sentence is joined by the conjunction ‘and’ followed by ‘paid to’ (the recipient agent) followed by ‘every 6 months’.  If the words ‘every six months’ were placed right after ‘$500,000’, the meaning would be completely different.  Given the plain and natural meaning of ‘every 6 months’ placed in the sentence, it is a specification of the frequency of payments rather than the application of the sales threshold.  I disagree with the Plaintiff’s argument that the words ‘every six months’ also referred to the application of the threshold US$500,000.  However, for the sake of argument, I will also examine the background, conduct and past performance of clause 3 throughout Ms Yap’s employment period and the payments made to her during the relevant period in order to see if they supported the Plaintiff’s interpretation.  The past performance of clause 3 of the contract should reflect the parties’ intention and understanding of the term.  The past practice of Macpi HK was to settle Ms Yap’s 2005 and 2006 commission by applying the threshold of US$500,000 annually with the payment of commission every six months.  Calculations of commissions were prepared by the accounts department of Macpi Italy under Elena and Macpi HK’s accounts and financial reports and Ms Yap’s commissions were approved and signed by Mosso.  Cheques were made out by the bookkeeper at Macpi HK on Mosso’s instructions and signed by Mosso before each payment.  The approval of commission payments and adjustments to commission calculations in November 2006 by Mosso and Elena is supported by the emails exhibited (pages 118 and 150 of bundle C(B)).

54.  Elena as a director of Macpi HK, who was in charge of its accounting and finance matters, must have understood the terms of Ms Yap’s employment.  Her involvement with Ms Yap’s employment dated back to August 2000 when she took part at the interview of Ms Yap as a shipping clerk, bookkeeper and secretary of FEET.  It was Elena who asked Ms Yap to be a director in January 2003 when Quantock was incorporated.  Her contract with Quantock included for the first time the payment of sales commission at 2% for sales generated by her ‘to be paid every six months’.  Except for the relevant remunerations and certain minor details, the terms in Ms Yap’s contract were almost identical to her FEET contract and her contract with Macpi HK.  The condition of Ms Yap’s sales commission set out in clause 3 of the employment contract were known to Elena before they were applied in the calculation of Ms Yap’s commission in 2004, 2005 and 2006.  The spreadsheets prepared by Macpi Italy countersigned by Mosso and the payments of commission in 2005 and 2006 reflected the understanding of the contracting parties.  Even though Elena claimed the Macpi Italy accounts staff had not seen Ms Yap’s employment contract, the instructions and basis of calculation for the preparation of Ms Yap’s commission payments must have come from either Mosso or Elena or both.

55.  The basis of computation of Ms Yap’s commission throughout the years she was employed at Macpi HK provided a clear indication of construction of the terms of her employment accepted by both the employer and employee at the relevant time.  Despite the looseness of the words used in clause 3, they formed the basis the terms of the employment contract should be construed.  Furthermore, Elena admitted she was only advised in September 2007 by her Hong Kong lawyers clause 3 could be interpreted differently.  This further showed the parties had never intended to construe clause 3 in any other form during the employment until September 2007.

(2)   Over payment of $18,000 for October to December 2006

56.  On the Plaintiff’s second claim of overpayment of salary in the sum of HK$18,000 for October, November and December 2006, the terms of Ms Yap’s employment contract, the circumstances leading to the 22 January 2007 revision and the correspondences after the revision letter should be considered.

The revised terms of employment and commission        

57.  Ms Yap’s 28 February 2007 email was only one of her several email replies to the revised employment terms set out in Macpi HK’s 22 January 2007 letter to her (page 13 of bundle C(A)).  Judging from the various email replies she sent to Mosso and Elena after receiving the 22 January 2007 letter, it is clear she found the revised terms of employment unacceptable, this was clearly expressed in her 7 February 2007 email (page 195 of bundle C(A)).  Though her basic salary was increased from $20,000 to $29,000 per month, she realised she would be receiving a lower total income than before after taking into account the sales commission. It is clear she had rejected the 22 January 2007 revised terms of remuneration.

58.  Mosso claimed the revision to Ms Yap’s employment terms had been agreed and fixed in August 2006 during a taxi ride from Tsim Sha Tsui to Kwai Chung.  He further claimed Ms Yap knew the revision of her employment terms meant that her commission would be paid on an equal footing with other sales staff of the Macpi Group in Europe.  This was contrary to paragraph 24 of his first witness statement of 28 August 2008 where he stated they were engaged in negotiation in October 2006.

59.  Ms Yap, on the other hand, denied any of the details of the 22 January 2007 revised terms of remuneration had been explained to her.  She said she had no idea what other sales staff in the Macpi Italy Group was paid and the basis of calculation of their commission payments.  She said she was given to understand her request for a rise in the monthly salary and increase annual pay leave had been accepted by her employer in October 2006 but she was never told of the revised commission structure at any time until she received the letter in late January 2007. 

60.  In Ms Yap’s 3 August 2006 email to Elena, copied to Mosso and Raccagni, she referred to an oral agreement she made with Mosso and Raccagni on their previous visit to Hong Kong that commission would be paid to her quarterly instead of half yearly (page 192 of bundle C(A)).  Further, in her email of 26 September 2006, she asked Elena and Mosso for a higher fixed salary with a lower commission (page 193 of bundle C(A)).  These emails clearly indicated there was no agreement reached in August 2006 on revising the commission payment structure.  After she received the 22 January 2007 letter on the revision of her remuneration, Ms Yap informed Mosso she could not accept the new terms and proposed an alternative to the new commission structure suggesting to forego the commission in favour of a higher fixed monthly salary based on her past sales record in her early February 2007 emails (pages 123-124 bundle C(B)).  In the end, she expressed in her 28 February 2007 email the retention of the old remuneration and commission structure and forego the $6,000 wage rise (page 17 bundle C(A) and page 122 bundle C(B)). 

61.  I am unable to find any indication of consent to the new commission structure set out in the 22 January 2007 letter in Ms Yap’s 28 February 2007 email.  Under cross-examination, Mosso admitted he did not explain or discuss with Ms Yap the details of the new commission structure until sometime in early January 2007 or after the 22 January 2007 letter setting out the new terms of employment. Mosso also agreed that he did not explain the commission structure of the European sales staff of Macpi Italy to Ms Yap during the August 2006 taxi ride from Tsim Sha Tsui to Kwai Chung nor did he go into the details of the new commission structure. 

62.  Mosso admitted he received no commission at Macpi HK, and that other than Ms Yap, no staff at Macpi HK did.  On that basis, it would not be surprising for Ms Yap to be ignorant of the basis of computation of commission for other sales staff at the Macpi Italy Group or its subsidiaries.  The commission payment conditions under Ms Yap’s original employment contract and the revised commission terms set out in the 22 January 2007 letter could not have been more different; apart from quarterly calculation of commissions, the currency base was changed from US dollars to Euros and the original flat rate of 1.5% was replaced by a reducing sliding scale starting from 1.25%.  There was no evidence that these new terms were explained to Ms Yap before the 22 January 2007 letter.

63.  By early 2007, it is apparent the negotiations of Ms Yap’s terms of remuneration led to a rapid deterioration of her relationship with her employer.  The lodging of her claim at the Labour Department for the outstanding 2006-2007 commission was the last straw on the camel’s back for the Plaintiff.  It led to Mosso terminating Ms Yap’s employment with Macpi HK with immediate effect on 12 March 2007, the day of the settlement.

64.  The emails exhibited clearly showed Ms Yap had rejected the revised terms of remunerations set out in Macpi HK’s 22 January 2007 letter.  It was specifically stated in her emails of 7 and 28 February 2007.  It is clear the parties were still engaged in negotiation when she lodged her claim for the 2006 and 2007 commission.  As there was no agreement reached on the revised terms of employment, the original terms of employment continued to be effective up to Ms Yap’s dismissal by Macpi HK on 12 March 2007.  Consequently, her sales commission should be computed on the same basis as her original employment contract for the last quarter of 2006 and for 2007 up to and including the last day of her employment on 12 March 2007.  It follows she is entitled to commission payment for all business sales generated by her based on the original terms of her employment contract.

65.  Ms Yap, in rejecting the revised terms of remuneration and commission, requested to be restored to the original terms of remuneration, and offered to return the monthly salary increment of $6,000 in October, November and December 2006 in her 28 February 2007 email.  On the basis that no agreement was reached on the variation of the terms of remuneration and Ms Yap had offered to return the monthly salary increment of $6,000, I hold the increment of salary should be reverted.  Consequently, the increment payment of $18,000 in the months of October, November and December 2006 should be returned to Macpi HK.

(3)   Summarily dismissal due to misconduct and disclosure of confidential information of Macpi HK

66.  Macpi HK alleged it had wrongfully paid Ms Yap one month’s salary in lieu of notice when Ms Yap was in breach of her terms of employment by disclosing confidential company information and diverting businesses of Macpi HK to Raccagni and his companies and other ‘outsiders’.  This allegation was disputed by Ms Yap.  She claimed that since she started working for the Macpi related companies including FEET, Quantock and Macpi HK, she had always regarded herself working for the Macpi group.  Her understanding of the Macpi Group began with FEET when she was interviewed by Elena, Mr. Ferrandi (the former financial controller of Macpi Italy) and Mosso in August 2000.  On her month long training in Italy in September 2000, she was introduced to Raccagni by Elena who told her she was working under Elena and she should work with Raccagni.  FEET was sharing an office with Raccagni’s companies and this arrangement continued when she was made a director of Quantock in January 2003 together with Raccagni, who was also looking after the business in Shanghai and other Asian countries.  On 28 August 2003, her employment at Quantock terminated when she was transferred to work for Macpi HK which shared the same office address with Quantock and FEET.

67.  Elena denied she was a director or shareholder of Macpi Pressing, Quantock or Westson.  Mosso and Elena both denied they had instructed Ms Yap to report to Raccagni or to Quantock and Westson.  Mosso further pointed out that Raccagni was neither an employee nor an officer of Macpi and was not entitled to take part in the management of Macpi HK.

68.  Even though Mosso and Elena denied that companies such as Quantock, FEET, Westson or Far East Honest were owned by Macpi Italy, they were described as agent companies of Macpi Italy and were selling machines and other products of Macpi Italy exclusively.  It is not disputed that sales of Macpi products in China were all made through Macpi HK, Ima and Shanghai Manfield, they were clearly companies under the control or significant influence of Macpi Italy for its products were either sold through these companies or manufactured by them in China. 

69.  Paragraph 16 of the audited accounts of Macpi HK under ‘Material Related Party Transactions’ stated:

“In addition to the transactions and balances disclosed elsewhere in these financial statements, the company entered into the following material related party transactions:

	2006	2005
	EUR	EUR
With fellow subsidiary:
Purchases from Macpi SPA	7,302,519	3,137,873
With other related parties:
Purchases from Ima SPA	52,385	47,383
Purchases from Shanghai Manfield   Garment Machinery Co Ltd	471,953	485,157
Commission charged by Westson   International Ltd	518,803	264,207

Ima SPA and Shanghai Manfield Garment Machinery Co Ltd are entities subject to significant influence of the family members of CARTTABIA Elena and CARTTABIA Paolo, directors of the company.

Westson International Ltd is an entity subject to significant influence of MOSSO Luca, director of the company.” (Page 59 of Bundle C(B))

70.  The annual financial report of Macpi HK for the year ended 31 December 2006 (page 45 to page 59 bundle C(B)) stated at page 8 of the report (page 53 of Bundle C(B)) under ‘Reporting Entity’:

“Macpi Group (HK) Limited is incorporated in Hong Kong with limited liability. Its registered office is located at 8/F, LMK Development Estate, 10-16 Kwai Ting Road, Kwai Chung, New Territories, Hong Kong. At 31 December 2006, the directors consider the parent and ultimate parent of the company to be Macpi SRL, which is incorporated in Italy. This entity does not produce financial statements available for public use.”

71.  The fact that Elena is one of the two directors of Macpi HK and is in charge of the accounts department of Macpi Italy indicated the close connection between Macpi Italy and Macpi HK.  Furthermore, comments under clause 16 of page 14 of the report (page 59 of Bundle C(B)) setting out the transactions with fellow subsidiaries the amount of purchases from Macpi SPA and other related parties such as Ima SPA, Shanghai Manfield Garment Machinery Co. Ltd. with commission charged by Westson International Ltd clearly demonstrated the close relationship between Macpi Italy and Macpi HK and Mosso’s own interests in Westson.  Mosso’s interest in Westson is similar to Raccagni’s who is the director of Quantock and Shanghai Manfield selling Macpi products.  If Raccagni had a conflict of interest, so would Mosso.  The close connection of these companies with Macpi HK is reflected in Macpi HK’s annual report. 

72.  The annual returns of FEET, Quantock and Macpi HK exhibited also showed Raccagni was working closely with Macpi Italy and Macpi HK.  When Ms Yap was employed in August 2000 by FEET, Mosso was its director.  Her employment was transferred to Quantock in 2003 with Raccagni and herself as its directors.  In August 2003, Ms Yap was transferred to work for the newly incorporated Macpi HK with Mosso and Elena as its directors.  The 2008 annual return of FEET showed Raccagni as a director, as Mosso was the former director of FEET from 2000 to 2003, this further reflected the role Raccagni played in the Macpi Group.  They supported Ms Yap’s claim that she regarded the Macpi Group of companies to include FEET, Quantock, Far East Honest, Ima, Shanghai Manfield, Westson and Macpi HK and Macpi people included the shareholders and directors of these companies.

73.  At the 1 March 2010 hearing, Ms Yap sought and was granted leave to disclose the April 2009 edition of the J.S.N International magazine article reporting an interview with Raccagni with a picture of him. He was described as the managing director of Macpi Group (HK) Ltd.  The application for disclosure was opposed by the Plaintiff.  Subsequent to the disclosure, Macpi HK obtained the publisher of the magazine to issue a correction note stating that the managing director of Macpi HK was ‘Mr. Luca Mosso’.  However, Mosso failed to clarify in his 4^th witness statement filed after the March 2010 disclosure or in his evidence at trial the reason for Raccagni giving the interview on behalf of Macpi HK with his picture appearing in the article or that he should be mistaken as the managing director or that he, rather than Mosso, should give the interview to the magazine on behalf of Macpi HK.  Furthermore, contemporaneous emails between Mosso, Ms Yap and Macpi HK’s customers exhibited were all copied to Raccagni.  A large number of the emails exchanged related to orders placed by customers of Macpi HK handled by Ms Yap, the replies from Mosso to either Ms Yap or to the customers were often copied to Raccagni.  Mosso’s explanation was, after Ms Yap was dismissed, he had to bring in Raccagni to take over some of the work.  As most of the emails disclosed were dated before the departure of Ms Yap, they demonstrated Raccagni’s involvement was far from an outsider or merely a trading partner of Macpi HK.  Even on matters concerning Ms Yap’s revised commission structure, both Mosso’s and Ms Yap’s emails were copied to Raccagni and Elena.  Furthermore, under cross-examination, Mosso admitted though he had told Ms Yap not to disclose information to third parties, it was not in relation to Raccagni.

74.  The Plaintiff failed to pinpoint who were the outsiders that Ms Yap had disclosed confidential company information to or divert Macpi business to other than Raccagni and his companies.  Because Ms Yap believed Elena, Mosso and Raccagni were all Macpi people, she had been consulting Raccagni all along in Mosso’s absence and she had often reported directly to Elena on matters relating to sales and orders placed by her customers.  I have also found Macpi HK had failed to adduce any evidence of misconduct, wrongful disclosure of confidential company information to outsiders or conduct harmful to the company business on the part of Ms Yap.  Furthermore, there had never been any complaints lodged by Mosso or Elena of such conduct until after the Plaintiff brought its claim in the District Court, I find no support for the claim of dismissal based on misconduct. 

(4)   Breach of warranty of employment contract, leaking confidential company information leading to the Plaintiff’s loss of customers

75.  Based on the aforesaid findings in paragraphs 66 to 74 above, I find the Plaintiff has failed to establish any misconduct or breach of warranty of employment terms or leaking company confidential information committed by Ms Yap.  The Plaintiff had further failed to adduce any substantial evidence in support of its claim of loss or damages sustained.  Even if the Plaintiff did suffer a reduction of business as alleged, it could be due to many reasons, such as the usual fluctuation in business or the absence of a knowledgeable and hard working sales team.  I dismiss the Plaintiff’s claim against the Defendant for damages due to the loss of business or customers.

76.  On the Plaintiff’s alternative claim under money had and received by Ms Yap for the months of January to March 2007 of $19,950, on the basis that I have accepted the original terms of employment would apply upon the parties’ failure to reach consensus on revising Ms Yap’s remuneration, I allow the Plaintiff’s claim for the return of the salary increment for January to March 2007 of $19,950.

Defendant’s Counterclaim

77.  Ms Yap claimed the sum of HK$562,595.60 in outstanding commission for January to March 2007 based on sales generated by her in the value of Euro 3,582,083.80.  It was Mosso’s evidence that Ms Yap was entitled to commission for accounts handled by her that she had either cultivated or passed to her by Mosso.  Her main duties included cultivating customers, finding out customers’ machinery requirements and assisting customers in processing the orders and liaising with Macpi Italy.  She was not required to follow every step of a sale after an order had been placed by a customer located by her or through her.  Upon orders being sent to Macpi Italy for machines to be manufactured, she would be entitled to the commission on the sale.  No invoice would be issued until after the shipment of the machine from Italy and commission would only be payable to Ms Yap based on the invoice sale value after deduction of freight and packing charges.  A record of invoice sales would be compiled by Sally Cheung of Macpi HK after the machinery was shipped, she would record the invoice date, invoice number and the customer’s name, the value of the sale, the GCL number and the supplier’s reference.

78.  On the list of customers and total sale value of Euro 3,582,083.80 compiled by Ms Yap on page 69 of bundle C(B), Mr. Lee, the Plaintiff ‘s counsel, agreed only to his own version set out in a table exhibited in page 70 of bundle C(B) with a sale value of Euro 193,884.80.  The Plaintiff objected to the following sale orders claimed by Ms Yap:  

(1)  PDE order confirmed in January 2007: the Plaintiff claimed the order was postponed or cancelled;

(2)  Ace Style order in March 2007 for shipment in three parts: the Plaintiff claimed it was cancelled;

(3)  PT Busana Remaja: the Plaintiff claimed it was dealt with by Raccagni and his companies;

(4)  Chun Wing Group order confirmed in January 2007:  the Plaintiff claimed it was dealt with by Raccagni and his companies;

(5)  Triumph International: the Plaintiff claimed it was brought in by Mosso and followed up by him personally;

(6)  Yu Sung Industries: the Plaintiff claimed the order was brought in by Mosso;

(7)  Regina Miracle: Ms Yap claimed it was diverted by her to Mosso for follow up; the Plaintiff claimed the orders were placed after Ms Yap’s departure; and

(8)  Clover Group: Ms Yao claimed it was diverted to Mosso by her; the Plaintiff claimed the shipments were made on 3 April 2007 and 22 May 2007 after the departure of Ms Yap with the invoicing for payment and pre-sale services handled by Mosso.  The commission was awarded to Mosso, as was the sales commission generated from Regina Miracle orders.

79.  It was Ms Yap’s case that the invoice generated sheets prepared by Sally Cheung showed that PDE, Ace Style, PT Busana Remaja, Triumph, Regina Miracle, Clover Group, were all customers Ms Yap had previously handled and she had been paid sales commission relating to these companies in 2005 and 2006.  She therefore claimed she should be paid the commission generated by the completed sales in 2007.

The PDE order

80.  Ms Yap pointed out the order was confirmed in January 2007, they were large orders with deliveries on 20 March, May and July 2007.  The Plaintiff however relied on an email dated 13 June 2007 requesting for postponement to 24 September 2007 of the final delivery of the machinery.  It requested the order be raised “via Manson Ng in China and sent to the attention of Sally Cheung as soon as possible”.  It further stated that “in case of no official order be raised within 24 September, I am sorry to inform you the same has to be considered cancelled.”  Even though the email was sent to Raccagni, it referred to an order placed with Macpi HK.  It is not disputed that by June 2007 Raccagni was in charge of Macpi HK after Ms Yap’s departure on 12 March 2007.  Based on the reference to Sally Cheung of Macpi HK, the order was clearly handled by Macpi HK rather than Raccagni’s other companies or Westson.

81.  Other than the email of 13 June 2007(page 125 of bundle C(A)), the Plaintiff failed to produce any evidence to support its claim that the order was cancelled on 24 September 2007.  If the orders were indeed cancelled, there should be cancellation documents sent to Macpi HK prior to 24 September 2007.  I am not convinced that machinery that had been ordered and placed with Macpi Italy to manufacture could be cancelled with such ease and not pursued by Macpi HK.  I reject the Plaintiff’s claim that the order was cancelled without the support of evidence to that effect.

The Ace Style order

82.  Ms Yap claimed that the order from Ace Style in March 2007 under the MPI*SHK–20061127-144756 proforma invoice (page 69 bundle C(B)) should be included as part of sales generated by her in 2007.  The orders were split into three shipments; on the date of her departure, the first of the three shipments had already taken place, this was specified in the invoice dated 3 March 2007 of Macpi HK on account of Ace Style Group (page 98 of Bundle C(B)).  Ms Yap claimed she came to know the customer Ace Style at the Paris fair and eventually in 2006 she secured orders for development machines for which she had received commission in 2006.  She said Mosso told her the Macpi Italy New York office would take over and liaise directly with the customer’s New York office but Mosso had assured her her commission was guaranteed.  She exhibited at page 99 of bundle C(B) the proforma invoice dated 27 November 2006 which specified that delivery would be made in three parts, namely February, March and April 2007.

83.  Mosso claimed the Ace Style order was cancelled, he referred to page 126 of bundle C(A) showing an email from Ace Style dated 8 March 2007.  According to Ace Style’s email, Ace Style would take delivery of machines already shipped in March and settle payment for Euro 119,600 from its New York office.  For the remaining 13 machines in the value of Euro 258,800, Ace Style requested they be split into three shipments in May, June and July and payment to be settled in June, July and August.  In the same email, Ace Style confirmed its investment in Macpi machines.  Macpi has failed to produce any further document in support of its claim that the remaining Ace Style orders were subsequently cancelled.  On this basis, I find the Plaintiff has failed to establish a defence to this claim.

The PT Busana order

84.  Mosso claimed the PT Busana orders were placed with Raccagni’s company.  Ms Yap disagreed.  She claimed this customer was brought in by her and an order for development machine was placed on 13 October 2006 for which she had received sales commission. She further claimed that Raccagani had only got involved on behalf of Macpi HK and Westson was never involved with this customer.  She produced email exchanges at pages 112 to 114 of bundle C(B) and a purchase order dated 12 January at page 115 of bundle C(B) showing the shipment for the machine was scheduled for May 2007.  On Mosso’s admission, Raccagni was brought in after Ms Yap’s departure; this should not affect Ms Yap’s entitlement to the sale order that was completed on 12 January 2007. 

The Chun Wing Group Order

85.  Mosso claimed that this customer was handled by Raccagni and his company.  Ms Yap disagreed, she claimed she met the representatives of Chun Wing at the Lyon show in 2006 for whom she had subsequently arranged demonstrations of Macpi machines that led to Chun Wing placing the order.  She claimed the order in question was confirmed in January for delivery in mid-May and she had issued on behalf of Macpi HK a proforma invoice.  She produced an email exchanged between herself and Mr. Nelson Yip of Chun Wing Holdings confirming the order on 10 January 2007 (page 26 of Bundle C(B)).

86.  In the exhibits produced by the Plaintiff at page 134 of bundle C(A), Raccagni in his email of 19 March 2007 confirmed with Mr. Nelson Yip of Chun Wing Holdings the sale of Macpi equipments and he signed as Armando R., Macpi HK.  The email clearly showed Raccagni was acting on behalf of Macpi HK in this transaction. On this basis, I accept Ms Yap’s evidence that this order was concluded by her in January 2007.

The Triumph International order

87.  Ms Yap claimed that she had arranged a high level meeting for Elena, Mosso and Raccagni with Triumph and Triumph subsequently placed orders for sampling and development machines on 16 June, 5 August and 5 October 2006 for their Vietnam factory.  She was told by Mosso her commission for orders placed by Triumph would be guaranteed even though the Triumph orders would be handled by him in future because he wanted to personally attend to this German customer though the orders were made through Macpi HK.  Ms Yap said she first came into contact with Triumph in 2003 and had worked hard to secure development orders from Triumph, her commission payment in 2006 had included the 9 March 2006 order.  Based on the email produced by the Plaintiff at page 135 of bundle C(A), the proforma invoice was issued by Macpi HK under an order from Triumph on 7 March 2007.  Hence, the order was placed by Triumph before Ms Yap’s departure on 12 March 2007.

88.  I accept Ms Yap’s evidence that Triumph was a client she had developed for which she had received commission previously.  As the relevant orders were placed before her departure from Macpi HK, she should be entitled to commission for the orders placed by Triumph.

The Yu Sung Industries order

89.  Mosso claimed the client was brought in by him and all transactions were handled by him.  Ms Yap disagreed, she claimed she met Mr. John Chang of the Korean company JC International in or about 2003 or 2004 and Mr. Chang informed her Yu Sung Industries was the end buyer.  Ms Yap met Yu Sung’s representatives at the Lyon fair in 2006 and Yu Sung had asked for a demonstration of the machines.  The emails exhibited at pages 136 to 151 of bundle C(A) indicated in November 2006 John Chang wrote to Mosso requesting for information and a demonstration of Macpi machines.  Later, he thanked Ms Yap for arranging a demonstration of the machines to him at their meeting in Hong Kong on 27 November 2006 (page 143 of bundle C(A)), it resulted in Yu Sung placing an order.  Ms Yap produced a proforma invoice for the order and a payment transfer from Yu Sung Industries (pages 101 to 103 of bundle C(B)).

90.  Mosso claimed in his witness statement that the commission from the Yu Sung Industries order was awarded and paid to his own account.  However, since Mosso admitted he received no commission for his work in Macpi HK under his contract with Macpi Italy, if commission on this order was paid, it should be paid to Ms Yap as she had shown she had cultivated the customer and handled the order.

The Regina Miracle order

91.  Ms Yap alleged that she brought the customer in after an initial contact in 2003 and she had been paid commission in 2006 for sales placed by Regina Miracle.  Before Ms Yap’s departure from Macpi HK, Regina Miracle had already placed orders which were forwarded to Macpi Italy.  Machineries ordered were delivered in March, April, May and June 2007 for which she was responsible.

92.  Mosso admitted that Regina Miracle was a customer diverted to him by Ms Yap, but because the orders from Regina Miracle were placed after her departure from Macpi HK, the commission for these orders had been awarded to him.

93.  I accept Ms Yap’s evidence that she had personally handled Regina Miracle’s orders and that they were placed before her departure from Macpi HK even though shipments of some of the machineries were made after her departure.  Mosso admitted he was the recipient of the commission for the sales.  As he was not entitled to commission at Macpi HK, they were obviously intended for Ms Yap. On this basis, the commission generated by these sales should be awarded to Ms Yap.

The Clover Group order

94.  Mosso claimed this customer was diverted to him by Ms Yap for follow-up action.  The orders were not completed at the time of Ms Yap’s departure from Macpi HK, and they were subsequently handled by him.

95.  Contrary to Mosso’s evidence, Ms Yap produced evidence of payment from the Clover Group in the form of post-dated cheques which she claimed she received on 9 February 2007 and she had hand-written the date on receipt of these cheques (page 104 of bundle C(B)). 

96.  I accept Ms Yap’s evidence supported by the two post-dated cheques on page 104 of bundle C(B).  They clearly showed payment for the two orders from the Clover Group had been settled by two post-dated cheques, the orders were concluded when the payment was made.  Ms Yap is entitled to the commission.

97.  I conclude on the aforesaid basis that Ms Yap is entitled to her claim of the 2007 sales commission.  She should be paid the sum of HK$518,742 after taking into account the threshold deduction of US$500,000 for the year 2007.

Conclusion

98.  I dismiss the Plaintiff’s claim for the overpayment of commission in 2006 for the reason that it was concluded and subject of a compromise settlement at the Labour Department.  I further find that the commission arrangement under her contract of employment, Ms Yap was entitled to 1.5% of the sales generated and handled by her after the annual deduction of the threshold sum of US$500,000.

99.  As the parties failed to agree on the terms of revision of Ms Yap’s remunerations in February 2007, and based on Ms Yap’s offer on 28 February 2007, she should repay to the Plaintiff the salary increment sum of HK$18,000 for the three months at $6,000 each for October, November and December 2006.  For the same reason, Ms Yap’s entitlement to 2007 commission is restored to the original terms under the 28 August 2003 employment contract.  The same applies to the salary increment for January to March 2007 of $19,950.  They should be reverted to the Plaintiff.

100.  I also found that she was entitled to be paid one month wage in lieu of notice because the Plaintiff failed to discharge the burden of proof that she was in breach of her employment contract for divulging confidential information of the company by communicating directly with Macpi Italy’s Elena Carttabia and Raccagni who she regarded as her bosses and were ‘Macpi people’.  The Plaintiff’s claim on the dismissal due to misconduct is therefore dismissed.

101.  On the Defendant’s counterclaim, I am satisfied she has successfully proved her entitlement to the 2007 commission for sales generated by her and completed by her even though she might not have followed up the orders to the delivery stage. I accept her claim set out on page 69 of bundle C(B) that the orders generated by her amounted to Euro 3,582,083.80.  As Ms Yap left Macpi HK on 12 March 2007, the annual threshold of US$500,000 is deducted before the commission of 1.5% is applied, the calculation is therefore as follows:

	Euro 3,582,083.80
Less	Euro 362,082.70 (equivalent to US$500,000 at the exchange rate of US$1.38 = Euro 1)
	Euro 3,220,001.10
Multiply by	1.5%
	Euro 48,300  (HK$518,742)
	(At exchange rate of 1 Euro = HK$ 10.74 on 17 July 2007)

Summary

102.  Under the Defendant’s counterclaim, I grant the judgment sum of $518,742 less $18,000 and $19,950 repayment of salary increment.  The Defendant is entitled to the judgment sum of $480,792.

Interest

103.  Interests is payable from the date of Ms Yap’s claim to the date of judgment at half judgment rate, thereafter at full judgment rate.

Cost

104.  Costs should follow the event.  I make an order nisi that the cost of the action shall be borne by the Plaintiff, to be taxed if not agreed with certificate for counsel.  Should there be no application on costs within 14 days hereof, the order will be made absolute.

Post Script

I wish to comment on the improper use of witness statements by counsel for the Plaintiff for the inclusion in the 4^th supplemental witness statement of Mr. Mosso an attack on the court’s ruling allowing the disclosure of documents after full arguments by the parties. The 4^th supplemental witness statement was filed on the Plaintiff’s application for an adjournment of the trial with leave to file a supplemental witness statement in answer to the documents disclosed by the Defendant.  Witness statements are meant for facts only, whether they are admitted facts or in dispute (order 38 rule 2A), it is against the rules of court for the witness to raise legal arguments attacking the court’s order allowing the disclosure of documents.  Such arguments should be raised at an interlocutory appeal of the order; they have no place in the witness statement intended for facts to be proved by the witness at the trial of the action. 

Parties