GUIDO FERRANDO v. HUA DAO SHIPPING (FAR EAST) LTD

HCLA77/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO.77 OF 2005

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO.1690 OF 2005)

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J U D G M E N T

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1. This is the claimant’s appeal against the award made by the Labour Tribunal on 2 August 2005.  The background leading to this appeal may be summarized as follows.

Background

2. The claimant was first employed by the defendant in November 1996.  His last position before resignation was managing director.

3. On 21 June 2004, the claimant tendered his verbal resignation to Mr Umberto Nardi (“Mr Nardi”), chairman of the defendant.  The two of them and the president of the defendant’s majority shareholder, Mr Gianfranco Mazzanti, then had a meeting on 28 June 2004 to discuss about the claimant’s resignation (“the Meeting”).

4. It was the claimant’s case that the parties agreed at the Meeting :

(1) that he would cease working for the defendant immediately after the Meeting;

(2) that he would continue to receive the same payments he received before his resignation (i.e his salary and housing and travelling allowance) for another six months until the end of December 2004;

(3) that he would also be paid the same bonus equivalent to 10% of the defendant’s gross profits (which he had received in 2002 and 2003) for the year 2004 up until the end of 2004; and

(4) that in return, he would be restricted from working in the same industry up till the end of 2004.

5. The defendant’s case is this.  The parties had reached no agreement on bonus as alleged.  The claimant had never been paid any bonus during his service with the defendant.  As to the agreement to pay other items, it was merely “ex gratia” and “non-binding” in nature.

6. It is not in dispute that after the Meeting, the claimant ceased working for the defendant.  The defendant continued to pay the claimant up to October 2004 his monthly remuneration consisting of basic salary of HK$81,600; accommodation allowance of HK$31,500 and travelling allowance of HK$3,000.

7. The defendant then stopped making any further payment.  According to the defendant, it withheld the payments for November and December 2004 after it had discovered in October 2004 that the claimant had committed certain misdeeds, namely, he had without authority (a) used the defendant’s money to pay for his own personal income tax and (b) approved a salary increment of US$1,000 for himself since January 2004.

Proceedings in the Labour Tribunal

8. In April 2005, the claimant claimed in the Labour Tribunal against the defendant for :

(1) Items A : Arrears of wages for November and December 2004 in the sum of HK$163,380;

(2) Item B : Travelling allowance for November and December 2004 in the sum of HK$6,000;

(3) Item C : Accommodation allowance for November and December 2004 in the sum of HK$63,000; and

(4)     Item D : Bonus based on 10% of the defendant’s gross profit for 2004 with an estimated amount of HK$3,120,000.

9. On 2 August 2005, after trial, the Deputy Presiding Officer allowed Items A to C.  He rejected the defendant’s case that the agreement reached at the Meeting was “ex gratia” or “non-binding” in nature and that the claimant had committed the misdeeds as alleged.

10. However, the Deputy Presiding Officer accepted the defendant’s case on Item D and found that the parties had made no agreement on bonus at the Meeting.  He gave four reasons in rejecting the claimant’s case :

“23. First, I find it odd that the Claimant (as a sophisticated person) would not require the Defendant to record in writing had there been an offer of 10% Bonus of the Company’s profit for the entire 12 months of 2004 well knowing that he would not have to work for the next 6 months (from end of June to end of 2004) in order to protect his own interests. (‘Reason 1’)

24.  Secondly, even if this did not cross the mind of the Defendant at the time of discussion, it is unreasonable to take more than 2 months until 5th September 2004 for the Claimant to send over the e-mail (Document C-19 Exhibit 5) (‘the Email’) to Mr. Saleem to try and ‘recap’ what was discussed on 28 June 2004.  I see no reason why the Claimant would choose to send over this e-mail to Mr. Saleem who was not present at the meeting and not sending this e-mail directly over to Mr. Nardi.  Claimant testified that he had tried to contact Mr. Nardi before this e-mail was sent but was unable to get in touch with him.  If this had ever happened, I would have thought that in the normal course of events the Claimant should be stating this in the context of this e-mail and have it sent over to Mr. Nardi instead of Mr. Saleem.  Unfortunately, it was nowhere stated in this e-mail that contacts with Mr. Nardi had been made but in vain. (‘Reason 2’)

25.  Thirdly, there is no evidence from the Claimant to prove, to the standard of on balance of probabilities, that there was such an offer of 10% Bonus of the Company’s profit for 2004 as part of the ‘ex-gratia payments’.  It is difficult to believe from any practical or commercial sense; especially the sums involved are about 3 million Hong Kong Dollars, which is more than 20 times of the Long Service Payment the Claimant would have received had there been an outright dismissal by the Defendant, that the Defendant would make such an offer in addition to the already generous ex-gratia terms of paying the Claimant all he had been enjoying for another 6 months. (‘Reason 3’)

26.  Fourthly, since I have found as a fact that there is no such agreement on 10% Bonus as part of the ‘ex-gratia payments’, I need not consider whether the 2 payments received by the Claimant in 2002 and 2003 from Land Air and Sea Transport Limited (LAST) and Worldwide Maritime Enterprise Inc. were in fact payments coming from the Defendant. (‘Reason 4’)

27.  However, at this juncture, I should add that had I been required to make findings on the payments made by LAST and Worldwide, the Defendant would have great difficulty in arguing that the payments were not related to them since it is so plain and obvious on the evidence that these payments were given out only because of the performance of the contract of employment with the Defendant Company.  Claimant had not worked for these 2 companies and had only worked for the Defendant during the 2 years of these payments.  On the evidence, Mr. Saleem himself, who had been working for the Defendant Company and also appearing as Defendant’s representative in this case, had also received identical sums of these payments.  The Defendant could not simply hiding itself behind the shield of ‘agency relationship’.  The Court would consider reality and factual evidence and would not be affected by ‘labels’ or ‘technicalities’ set up to avoid legal liabilities.

I find for the Defendant regarding the claim for Bonus by the Claimant.”

11. The Deputy Presiding Officer accordingly dismissed Item 4.

12. On 23 September 2003, the Deputy Presiding Officer dismissed the claimant’s application for review.

13. The claimant now appeals against the Presiding Officer’s dismissal of his claim for Item D.

Gist of the claimant’s contention

14. The claimant seeks to attack the finding by the Deputy Presiding Officer that the parties had not reached any agreement on bonus at the Meeting.  The grounds of appeal address the four reasons given by the Deputy Presiding Officer individually.  In gist, the claimant argues that the reasons given by the Deputy Presiding Officer are clearly flawed and illogical and his conclusion that no agreement on the bonus was reached at the Meeting was plainly based on irrational reasoning which justifies interference by the appellate court.

The law

15. Section 32(1)(a) of the Labour Tribunal Ordinance, Cap.25 provides that a party dissatisfied with an award or determination by the Labour Tribunal may appeal to the Court of First Instance on the ground that the Tribunal is erroneous on point of law.  It does not mean that a finding of fact is always immune from challenge on appeal.  For it is well-established that the court who hears an appeal on errors of law only does have jurisdiction to interfere and quash a factual determination :

(1) which is based on a finding of fact or inference from the facts which is perverse or irrational; or

(2) where there is no evidence to support the decision; or

(3)     where the decision was made by reference to irrelevant factors, or without regard to relevant factors.

It is not necessary to identify a specific error law, if the decision cannot be supported, the appellate court will infer that the decision-making authority misunderstood or overlooked relevant evidence, or misdirected itself in law : See Runa Begum v. Tower Hamlets LBC [203] 2 AC 430, per Lord Millet at para.99 at p.462H, reaffirming Edwards v. Bairstow [1956] AC 14; followed by the Court of Appeal in Chow Kwong Fai, Edward v. The Commissioner of Inland Revenue, CACV20/2005, unreported, 7 October 2005, per Cheung JA at para.39.

16. Mr Vaughan, appearing for the defendant, does not dispute these propositions.

Errors of the Deputy Presiding Officer

17. Applying the above propositions here, I am of the view that the Deputy Presiding Officer’s finding that the parties had not reached the agreement on bonus at the Meeting cannot stand.  I will explain why below.

18. In Reason 1, the Deputy Presiding Officer found it odd that the claimant would not require the defendant to record in writing that it had offered at the Meeting to pay the bonus in order to protect his own interest.  When he held the lack of written record against the claimant, the Deputy Presiding Officer had, in my view, failed to give proper regard to these undisputed facts which were relevant to this matter :

(1) Most of the decisions made with the defendant’s corporate structure were made verbally.

(2) In connection with the claimant, all previous approvals relating to the salary increments were made verbally.  That point was even acknowledged by the Deputy Presiding Officer himself in his Reasons for Decision.

(3) The parties had all along enjoyed a very harmonious relationship.  There was a high degree of trust and confidence between the parties, which continued even after the claimant had resigned and at the time when he wrote the Email.

(4) The parties did not see the need to reduce into writing the agreement on other items reached at the Meeting.

19. Had the Deputy Presiding Officer given due regard to these factors, he might have come to a different view on the oddity or otherwise of the lack of any written record of the agreement on bonus.

20. In Reason 2, the Deputy Presiding Officer found it unreasonable that it took the claimant more than two months after the Meeting to send the Email to recap what was agreed and that he sent the Email to Mr Saleem and not Mr Nardi.

21. The Email is obviously a very important piece of evidence on the alleged agreement on bonus.  Either the Deputy Presiding Officer had rejected it or placed on weight on it for the reasons that he had given in Reason 2.  However, the Deputy Presiding Officer had failed to give proper regard to the undisputed evidence that the parties had all along been conducted most of their affairs verbally under a very harmonious setting.  The lapse of two months between the Meeting and the Email might not be that unreasonable after all.  Further, it was not unreasonable for the claimant to send the Email to Mr Saleem, who was the managing director of the defendant.  More importantly, the Presiding Officer had failed to give proper regard to the conduct of the defendant after receiving the Email.  Mr Saleem did not do anything other than informing Mr Nardi of the Email.  On the evidence before the Tribunal, Mr Nardi had apparently done nothing either.  For the defendant did not respond to the allegation relating to the agreement on the bonus at all.  Even the letter from its solicitors to the claimant dated 15 October 2004 did not refer to or refute the claimant’s allegation.  The Deputy Presiding Officer had also failed to make proper investigation with Mr Nardi if the parties had agreed on bonus at the Meeting as alleged and the reason for lack of response from the defendant.

22. In Reason 4, the Deputy Presiding Officer found that the claimant did receive performance bonuses as his legal entitlement for 2002 and 2003.  He rejected the defendant’s case that it had never paid the claimant bonus at all.  It is important to bear in mind that it is the claimant’s case that he had for all his years of service received annual performance bonus.  The 2002 and 2003 payments were examples of his entitlements.  In my view, the Deputy Presiding Officer should take into account these payments of bonus when assessing the veracity of the claimant’s case : if the defendant was legally obliged to pay him annual performance bonus, would it not be possible that the parties had agreed at the Meeting that the claimant would be paid the bonus for 2004 despite his resignation?  The Deputy Presiding Officer had erred in ignoring the payments of bonus in 2002 and 2003.

23. In Reason 3, the Deputy Presiding Officer found that the agreement to pay 10% bonus would not make any practical or commercial sense.  However, as noted, he had failed to give proper regard to the payments of bonus in 2002 and 2003.  He had also ignored the financial prejudice that the claimant might suffer because of the agreement not to work in the same industry within six months of resignation.

Conclusion

24. For the above reasons, I hold that the Deputy Presiding Officer did err in law in finding that the parties had reached no agreement on bonus at the Meeting.  I will therefore set aside his finding and allow the appeal.

25. Mr Wong, SC, appearing for the claimant, urged me to remit the case back to the Labour Tribunal with a direction that judgment on liability be entered on Item D and quantum be assessed.  As noted, I allow the appeal mainly because the Deputy Presiding Officer had failed to give proper regard to various relevant matters.  Had he done so, he might or might not have come to the same conclusion on Item D.  In the circumstances, I think the proper cause is to remit the case back to the Labour Tribunal with a direction that there be a trail de novo on Item D before another Presiding Officer.  And I so order.

26. Lastly, costs should follow the event.  I will therefore make an order nisi that the claimant shall have the costs of this appeal, to be taxed if not agreed.