TADJUDIN SUNNY v. BANK OF AMERICA, NATIONAL ASSOCIATION

CACV 12/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 12 OF 2015

(ON APPEAL FROM HCA NO. 322 OF 2008)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the Court):

1.  On 20 May 2016, we handed down our judgment (“the CA Judgment”) in which we dismissed the appeal of the Bank on liability and quantum in the plaintiff’s claim for damages for loss of bonus for 2007. The plaintiff cross-appealed the dismissal of her claims for underpayment of her bonuses for 2005 and 2006 and the quantum of damages for 2007 as well as the pre-judgment interest rate. We allowed her appeal only in respect of the pre-judgment interest rate. We made a costs order nisi on a global basis in respect of the costs of the appeal and cross-appeal, awarding 50% of the costs to the plaintiff.

2.  On 13 June 2016, the plaintiff filed a notice to act in person and on 17 June she filed an application for leave to appeal to the Court of Final Appeal, on the ground that the questions involved in the intended appeal are of great general or public importance and on the “or otherwise” limb.

3.  Having considered the submissions filed by the parties, we think it appropriate to determine the application for leave to appeal on the basis of the written submissions without an oral hearing.

4.  The plaintiff formulated nine questions in paragraph 10 of her application, contending that they are questions of great general or public importance that ought to be submitted to the Court of Final Appeal for decision.

Question 1: In reviewing the bonus discretion, whether it is necessary for the Court to set a threshold of irrationality for the claimant to surpass in order for him or her to establish a prima facie case.

5.  The arguments the plaintiff sought to raise by this question, distilled from the authorities cited by her, may be summarised as follows.

6.  In reviewing the bonus discretion of an employer, the court is not required to set a threshold of irrationality by applying the irrationality/perversity implied term.  The requirement of irrationality is difficult for an employee to surmount, because as long as the employee was paid something, it would be difficult for the court to find irrationality.  Rather, the court should review the exercise of the bonus discretion on the basis that the employer should make a fair and rational assessment.  This would be consistent with the implied term of mutual trust and confidence in an employment contract, such that the employer must not, without reasonable and proper cause, exercise the bonus discretion in a manner calculated or likely to destroy or seriously damage the relationship of mutual trust and confidence with the employee.

7.  There is academic support in the UK for the above proposition, with the proposal that the Supreme Court should conceptually reorder and rationalise the irrationality/perversity implied term and the implied term of mutual trust and confidence in such a manner that the former may be fitted within the auspices of the latter.  The plaintiff submitted it is therefore appropriate for the Court of Final Appeal to consider this question.

8.  The above arguments were not advanced before To J or before us on appeal.

9.  Throughout, the plaintiff’s case on her claim for underpayment of the discretionary bonuses for 2005 was that the Bank was under a duty not to administer its performance incentive programme and not to implement its performance evaluations in respect of her in an irrational, perverse or arbitrary manner that was not bona fide[1].  And in respect of the claim for underpayment of the discretionary bonuses for 2006, her case was that her bonus was irrationally low and the ratings in her performance evaluation were irrational[2].  Discovery was ordered by the court on the basis of the implied terms as pleaded[3].  Evidence at trial had taken the course that the plaintiff sought to impugn the 2005 and 2006 bonuses for irrationality and the Bank was to meet that challenge.

10.  On the evidence before him, To J found that the 2005 and 2006 bonuses could not be impugned as irrational and the plaintiff’s claims were “quite unmeritorious”[4].  On appeal to the Court of Appeal, there was no challenge to the propriety of the irrationality/perversity implied term or the high burden of irrationality[5].  The plaintiff’s cross-appeal on the dismissal of her claims for underpayment of the 2005 and 2006 bonuses only sought to challenge the facts as found by To J.

11.  Given these circumstances, it is unnecessary for us to discuss the merits of the above arguments advanced for the first time in the leave application.  The Court of Appeal has followed a practice of not granting leave to appeal to completely new points not argued on appeal and below, but leaving it to the Appeal Committee of the Court of Final Appeal to determine if there are exceptional circumstances to warrant the granting of leave despite the hurdle of “not considered on intermediate appeal” (Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356 at §39; followed in: Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd & Anr, CACV 227/2005, 26 June 2007, at §4; Ageas Insurance Co (Asia) Ltd v Lam Hau Wah Inneo, CACV 65/2014, 19 May 2015, at §§7 to 9; The Law Society of Hong Kong v A Solicitor, CACV 78/2014, 10 July 2015, at §§4 to 7).

12.  Following this practice, we would leave it to the Appeal Committee to consider if there are exceptional circumstances to allow this completely new point to be entertained, when it had not been raised by the two different legal teams who had represented the plaintiff at trial and on appeal, and when it was not explored in the evidence at trial whether there was breach of an implied term of mutual trust and confidence in the exercise of the bonus discretion.

13.  We decline to exercise our discretion to grant leave to appeal on Question 1.

Question 2: In the context of bonus disputes, whether bonus records of other employees in the same and/or comparable positions in the same company (“comparable fellow employees”) are discoverable and/or whether a failure of a party who is in the sole possession of such records to disclose them entitles the Court to draw adverse inference against that party.

14.  The plaintiff contended that this question should be answered in the affirmative and that the judge was wrong to hold that there is no evidence she “singularly received an irrationally low bonus compared with most or all members of ISSG”[6] and that the judge should have drawn an adverse inference against the Bank for refusing to disclose the bonus records of comparable fellow employees.

15.  The plaintiff had applied for specific discovery of a large number of documents, including those relating to the performance evaluation and the determination of bonuses for other employees who worked in the same group (“the Bonus Documents”).  M Chan J on 22 December 2011 refused to order discovery of the Bonus Documents as she was not satisfied that such documents were necessary to dispose fairly of the cause or matter in this action or for saving costs, bearing in mind that the question in dispute was whether the Bank’s assessment of the plaintiff and its determination of the plaintiff’s bonuses were such that no reasonable employer would have made, and not whether the Bank’s decisions were fair to the plaintiff or whether they were reasonable.  The judge only ordered discovery of the Bonus Documents relating to one of the employees, John Liptak, as relevant to the plaintiff’s case of perversity or irrationality of the Bank’s evaluation of the plaintiff and its decision on the bonuses paid to her[7].  The plaintiff sought leave to appeal the decision of M Chan J.  Leave was refused on paper as totally without merit by the Court of Appeal (Tang VP and Fok JA, as they then were) in HCMP 337/2012, 29 March 2012.

16.  On behalf of the Bank, it was submitted that as the plaintiff had not sought leave to appeal to the Court of Appeal in respect of the refusal of the Bonus Documents, it would not be appropriate to grant leave to appeal on Question 2 to allow her to re-litigate an issue which she chose not to pursue when she sought leave to appeal to the Court of Appeal.

17.  The plaintiff submitted she had sought leave to appeal against the decision of M Chan J in respect of the Bonus Documents, with reference to the documents adduced in evidence and relevant parts of the transcript of her evidence at the trial.

18.  Regardless of whether the plaintiff had appealed the specific order refusing discovery of the Bonus Documents, the fact remains that leave to appeal against this interlocutory decision was refused by the Court of Appeal.  It cannot be re-opened in the Court of Final Appeal.  Besides, this question relates to a fact-sensitive enquiry and cannot be a question of great general or public importance.  We decline to grant leave to appeal on Question 2.

Question 3: Whether the bonus discretion of the employer is fettered by its own bonus policy.

19.  The plaintiff argued that the bonus policy would include the relevant factors to be taken into account and the due process in making the bonus decision and this question should be answered in the affirmative.

20.  The “Pay for Performance” programme of the Bank was fully considered by To J, who held that the Bank’s discretion as regards bonus had to be exercised in accordance with the principles in the programme[8].  This finding is in favour of the plaintiff.  She did not advance other arguments on appeal.

21.  We do not think this gives rise to a question of great general or public importance.  We refuse to give leave on Question 3.

Question 4: In the context of employment law and/or bonus discretion, under what circumstances that the Court is entitled to interfere with management decisions and/or ask the question whether any reasonable employer could have come to such a conclusion.

22.  The plaintiff argued that management discretion has become a powerful trump card for the employer to keep management decisions out of the purview of the court and if that is upheld, it would render hollow the implied term of mutual trust and confidence.

23.  This seems to be a variation of Question 1.  We decline to grant leave for the same reason.

Question 5: Whether a failure of internal due process with regard to performance evaluation and/or performance incentive programme by the employer entitles the Court to draw adverse inference against them.

24.  The plaintiff argued that applying the implied term of trust and confidence between the employer and employee, this would require the employer to give reasons for the exercise of his discretion to pay or withhold a bonus, and where there were breaches of due process and the employer failed to provide sustainable explanation, the court is entitled to draw adverse inference against the employer.

25.  This is a new point not raised in issue in the court below and on appeal.  Allegations of failure of due process with regard to performance evaluation or the performance incentive programme were not canvassed or properly canvassed in evidence.  We refuse to grant leave to appeal on this question.  Besides, it is entirely fact-sensitive and does not give rise to any question of great general or public importance.

Question 6: Whether the criteria suggested by Potter LJ[9] cited in paragraph 264 of the trial judgment is applicable generally on how discretionary bonuses should be assessed.

26.  The four criteria suggested by Potter LJ as summarised by To J were: (a) the purpose of the bonus scheme; (b) the claimant’s expectation; (c) a comparison of the claimant’s position with the overall remuneration package; and (d) the range of salary and bonus payments being paid to employees who were of the same title and status as the claimant, not only as an indication that bonuses were being paid in the years concerned, but to see whether he was in the right ball park when assessing what might have been paid to the claimant.

27.  The plaintiff contended that the answer to Question 6 should be no in that the criteria set by Potter LJ should be regarded as unique to that case as there was “no contractual signposts in relation to the formula for calculating the bonus payable”[10].

28.  It was not argued before us that the criteria aforesaid should not be applied, so this is again a new point.  All that To J had held was that the range of criteria that may properly be taken into account in assessing the amount of bonus would include the four suggested criteria.  We do not accept the suggested criteria should be regarded as unique to the case of Horkulak.  It is entirely fact-sensitive and we do not think there is any question of great general or public importance.  We refuse to give leave on Question 6.

Question 7: Whether evidence of the borrowing costs is required for a successful claimant to be awarded a rate higher than Prime + 1% in respect of pre-judgment interest.

29.  To J awarded the plaintiff pre-judgment interest at the rate of 2.85%, representing 2% over HIBOR at 0.85%.  We set aside the judge’s order and substitute it with an order of 1% over the HSBC prime lending rate for the pre-judgment interest.  So to that extent the plaintiff’s cross-appeal on pre-judgment interest was successful.

30.  The plaintiff argued she should have been awarded pre-judgment interest of 3% over prime rate rather than the 1% over prime rate conventionally used in most cases, that the court can simply exercise its discretion to depart from the conventional rate without requiring her to adduce evidence as to the rate of interest she might actually be expected to incur had she sought to borrow the amount of the damages which she has been awarded. So her answer to Question 7 would be no.

31.  We refuse to give leave on Question 7 as we do not think it reasonably arguable.  The effect of Komala Deccof v Pertamina [1984] HKLR 219 at 223G to H is that evidence is required to warrant a departure from the conventional rate.

Question 8: Where a plaintiff puts forth uncontradicted and uncontested evidence of a multiplicand for assessment of damages, whether a Court is entitled to disregard that uncontradicted and uncontested evidence and substitute a different multiplicand which neither party was given an opportunity to contest.

32.  The plaintiff had argued on appeal that the judge should have used a multiplicand of US$13.2 million instead of US$6.06 million, on her unchallenged evidence that her portfolio would have generated US$13.2 million by December 2007.  We rejected that argument for the reasons given in §159 of the CA Judgment.

33.  This is entirely fact-sensitive.  It does not give rise to a question of great general or public importance.  And we do not think it reasonably arguable.  We refuse to grant leave.

Question 9: Whether the District Court has exclusive jurisdiction over sex discrimination claims even though the claims were not brought under Sex Discrimination Ordinance (Cap 480).

34.  The plaintiff argued that section 76 of the Sex Discrimination Ordinance does not restrict a claim in respect of sex discrimination to the jurisdiction of the District Court, as long as that claim is not brought under that ordinance.  So a claimant should have the choice to combine a breach of contract action and sex discrimination proceedings in one action and bring the action in the High Court, provided that the claimant does not claim under the Sex Discrimination Ordinance.

35.  The plaintiff had originally pleaded an implied term the Bank owed a duty not to commit any unlawful act of discrimination against her.  This was struck out by a Master in 2008 on the ground that it violated the exclusive jurisdiction of the District Court in sex discrimination complaints under section 76 of the Sex Discrimination Ordinance.  There was no appeal against that decision.  The plaintiff then commenced proceedings against the Bank in the District Court alleging breaches of the Sex Discrimination Ordinance.

36.  The judge did not find it necessary to make a determination on the jurisdictional issue as the issue of sex discrimination is irrelevant and he declined to factor in sex discrimination in his finding of rationality of the Bank’s scheme or assessment of discretionary bonus[11].  This issue was not pursued on appeal.

37.  It would not be appropriate to grant leave on this question, which was not the subject of determination in the court below or on appeal.

“Or otherwise” limb

38.  We do not think there are any exceptional circumstances to justify the granting of leave under this limb.

Costs

39.  The plaintiff’s application for leave to appeal is dismissed with costs.

40.  The Bank has submitted a statement of costs for summary assessment with a total amount of $102,910.  The plaintiff submitted that reasonable costs should not exceed $25,000.

41.  We think it appropriate to reduce the costs claimed on account of unnecessary duplication of work of three fee earners and excessive time, but not to the extent of reducing the fees to $25,000.  We assess a reasonable amount of costs properly incurred in this application by the Bank at $60,310, which we order the plaintiff to pay.