JEBSEN AND CO LTD AND ANOTHER v. CHOI FUNG YEE

DCCJ 3070/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3070 OF 2004

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JUDGMENT

1.  The 1^st Plaintiff is a limited company incorporated in Hong Kong.  On 1 April 2003, the 1^st Plaintiff’s Wholesale Travel Division, the 2^nd Plaintiff, was incorporated as a subsidiary company of the 1^st Plaintiff.  The Defendant was employed as a ticketing agent of the Plaintiffs.

2.  The Plaintiffs claim against the Defendant damages for breach of contractual and fiduciary duties as the Plaintiff’s employee for the sale on credit a total of 121 tickets (the said air tickets”) in the value of $883,444.20 to one Mr. Xu Jin Hua (“Mr. Xu”) between August 2002 and January 2003 without the prior consent of the Plaintiff, for failing to enter the said sales in the 1^st Plaintiff sales record systems according to prescribed procedure of the 1^st Plaintiff and for procuring a colleague Mr. Law Wai Yip of the accounts department not to alert the 1^st Plaintiff of the said unauthorised sale of air tickets.

3.  The Plaintiffs claim that after the 1^st Plaintiff became aware of the unauthorised sales in late January 2003, the Defendant agreed to obtain payments from Mr. Xu to settle the outstanding account.  The Plaintiffs claim that because the Defendant by applying to open an account on Mr. Xu’s behalf, she had agreed to be liable for Mr. Xu’s account.  For this reason, the Defendant confirmed in writing to the 1^st Plaintiff on 10 February 2003 admitting her liability for the unauthorised sales and agreeing to pay for the said air tickets should Mr. Xu fail to settle the outstanding charges within 3 months.

4.  The Defendant paid the Plaintiffs the sum of $136,245 between February and May 2003.  Such payments were said to be payments made by Mr. Xu through the Defendant.

5.  The Defendant, on the other hand, claimed that she had complied with the Plaintiff’s procedures in the sale of air tickets.  She denied that it was her duty to demand payments from clients who have a credit account at the Plaintiffs.  That it was the duty of the Plaintiffs’ accounts department to do so.

6.  The Defendant denied she should be or had agreed to be liable for Mr. Xu’s outstanding account.  She further claimed that the confirmation in writing of 10 February 2003 was made under duress from the 1^st Plaintiff and it is void for failure of consideration.

7.  It is the Plaintiffs’ pleaded case that the Defendant owed the Plaintiffs a fiduciary duty and/or alternatively a contractual duty

(a)	not to misuse her position, knowledge or opportunity to benefit herself or a 3rd pary;
(b)	not to engage in activities with a 3rd party contrary to the interests of the Plaintiffs/her employers;
(c)	to account to the Plaintiffs all properties entrusted to her by the Plaintiffs and all properties received by her on the Plaintiffs’ behalf;
(d)	to act, conduct and serve the Plaintiffs honestly and in good faith.

8.  The Plaintiffs claim that the Defendant was in breach of her duty:

		Particulars
(a)	misappropriated air tickets of the Plaintiffs;
(b)	failed to make entry of the sale of air tickets in the Plaintiffs’ sales record systems;
(c)	caused or permitted credit to be extended to a cash account customer without authority;
(d)	procured a colleague Mr. Law not to alert the 1st Plaintiff of the aforesaid breaches of duty and/or fiduciary duty.

The Issues

9.  The followings are the issues identified by the Plaintiff to be determined:-

(a)	Whether the sale of 121 air tickets to Mr. Xu on credit was unauthorised;
(b)	Whether the Defendant failed to comply with the Plaintiffs’ sales record systems in accordance with proper procedures;
(c)	Whether the Defendant procured Mr. Law not to alert the 1st Plaintiff of the unauthorised ticket sales to Mr. Xu;
(d)	Whether the Defendant agreed to be personally liable for Mr. Xu’s account when she requested for an account to be opened in Mr. Xu’s name in July 2002;
(e)	Whether the Defendant sign the confirmation of 10 February 2003 under duress;
(f)	Was the Defendant in breach of contractual duty and/or fiduciary duty to the Plaintiff?

10.  The Plaintiff amended the writ of summons by joining the 1^st Plaintiff after the close of the Defence case.  In spite of the said amendment, the Defendant maintained the Plaintiffs had no locus standi to sue the Defendant.

11.  It is the Defendant’s defence that the Defendant had no knowledge of the credit limit of Mr. Xu’s  account set by the 1^st Plaintiff.  She maintained that to her knowledge, Mr. Xu’s account was a credit account, as such she was not required to enter the sales into the 1^st Plaintiff’s computer records until payments were tendered by the customer.  That it was not her duty as a ticketing agent to demand payments from a client who maintained an account with the Plaintiffs for the purchase of air tickets.  That it was further the duty of the Plaintiff’s accounts department to demand for payments from all credit account customers.

12.  It is further the Defendant’s case that the Plaintiffs are estopped from claiming against her because it was the responsibility of the Plaintiffs’ accounts department to check the records and demand payments from outstanding accounts.  That even if she had failed to follow proper ticket procedures because of the Plaintiffs’ failure to alert her of the mistake(s) within a reasonable time, the Plaintiffs have waived their rights against her and is estopped from claiming damages against her.

Findings

Right to Sue

13.  On the question as to whether the Plaintiffs have a right to sue the Defendant, the 1^st Plaintiff based its claim against the Defendant on an employment letter of 16 March 2001, signed by the Defendant on 17 March 2001 (the 1^st agreement)(P.67 of bundle).  Upon the incorporation of the 2^nd Plaintiff in 2003 which took over the Wholesale Travel Division of the 1^st Plaintiff, the 2^nd Plaintiff and the Defendant entered into a second employment agreement.  The Defendant signed the agreement on 27 March 2003 (“the 2^nd agreement)(see p.71 – 72 of the bundle).

14.  It is the submission of Mr. Lam, counsel of the Defendant, that because the 1^st Plaintiff transferred its Wholesale Travel Division to the 2^nd Plaintiff in March 2003 including all chose in action, the 1^st Plaintiff has no locus standi in these proceedings.

15.  Mr. Wong, counsel for the Plaintiff, denied that the 1^st Plaintiff transferred its right to sue the Defendant to the 2^nd Plaintiff.  He maintained that the 1^st Plaintiff was the employer of the Defendant at the relevant period in August 2002 to January 2003, has a right to sue the Defendant under the 1^st agreement.  While the 2^nd Plaintiff as her subsequent employer also possesses the right to sue the Defendant under the 2^nd agreement.

16.  Mr. Lam further queried the 1^st Plaintiff’s status, he claimed it is the 1^st Plaintiff’s duty to show it is a going concern and had not been wound up.

17.  By querying if the 1^st Plaintiff is a going concern, Mr. Lam is in effect questioning if the solicitor of the 1^st Plaintiff had been properly instructed by the board of the 1^st Plaintiff to represent its client.  As the Defendant failed to put the 1^st Plaintiff’s solvency in issue in her re-amended defence, the burden is not on the 1^st Plaintiff to show it is not in liquidation.  It must be assumed that the 1^st Plaintiff’s solicitor had full and proper instructions to take up these proceedings unless there is evidence to the contrary because all winding up proceedings are advertised and are within the realm of public knowledge.

18.  I accept Mr. Wong’s  submission that after the 1^st Plaintiff joined in these proceedings, the Plaintiffs have the right to sue the Defendant under the two employment agreements.

Mr. Xu’s account with the Plaintiffs

19.  It is not disputed that Mr. Xu had been purchasing air-tickets in cash from the 1^st Plaintiff since April 2002 through the Defendant (“Miss Choi”) as his ticketing agent.  It is Miss Choi’s evidence that Mr. Xu asked her to find out if he could open an account at the 1^st Plaintiff so that he would have a record of the tickets purchased by him on behalf of his friends and colleagues.

20.  At the request of Mr. Xu, in or about July 2002, Miss Choi asked Mr. Yuen, the general manager of the Wholesale Travel Division of the 1^st Plaintiff if Mr. Xu could open an account with the 1^st Plaintiff.  Mr. Yuen agreed and instructed Miss Choi to leave Mr. Xu’s address and contact particulars with the accounts department.  Since Mr. Xu had no address or phone number in Hong Kong, Miss Choi used her own name and her office address as the contact address for Mr. Xu’s account.

21.  It is Mr. Yuen’s evidence that when he approved Miss Choi’s application for an account to be set up for Mr. Xu, he had approved it as a COD (cash on delivery) account which meant the client would be eligible to settle payment for air tickets issued by cheques for ticket orders of under $50,000.

22.  It is, however, Miss Choi’s evidence that so far as she understood, all client accounts with the Plaintiffs are credit accounts and all clients with an account would be entitled to purchase tickets on credit.  In which case, the accounts department would be in charge of collecting payments from all clients with accounts at the Plaintiffs.  She claimed she knew nothing about the existence of a COD account.

Ticket sale procedures at the Plaintiffs

23.  Miss Choi claimed that for clients with an account at the Plaintiffs, she would only be required to issue a ticket ordered by the client by operating the ticketing machine using either the Abacus or Galileo system and hand over the ticket and passenger receipt to the client.  The agent coupon issued together with the ticket and passenger receipt would be kept by her in a tray placed on a counter behind her.  If the client paid in cash, she would type a sales order into the computer system linked to the accounts department, an invoice would then be issued and printed.  She would then submit the cash payment received together with the agent coupon and the sales order to the accounts department for record.

24.  Miss Choi claimed that for clients with an account at the Plaintiffs she was not be required to issue an invoice until the client settled payments, consequently, no entries would be made by her in the Plaintiffs’ ‘Sales Record Systems’ by recording the sales orders into the Plaintiff’s computer system.

25.  Miss Choi’s evidence is disputed by the Plaintiffs.  According to Mr. Yuen, all sales orders whether cash sales or credit sales have to be recorded in the Plaintiffs’ Sales Record Systems.  The system is linked to the accounts department’s record so that the accounts department would have an immediate record of all the air tickets sold through the Plaintiffs’ ticketing agents.

26.  It is Mr. Yuen’s evidence that if the sale was in cash to a client without credit the sales order would be entered in a cash file.  For individual clients who have an account, the entry would be made in the file of the individual client accessible by entering his name and account number.

27.  Further, all ticketing agents are required to access the company’s client files, the details on the computer files would disclose if a particular client’s account was a COD account or a credit account.  The information on the file would state the ‘credit date’.  If the credit date is ‘O’, it means the account is a COD account.  It is Mr Yuen’s evidence that all of the Plaintiff’s credit account customers were and are corporate customers.  Individuals were and are only entitled to set up COD accounts.  Therefore, the ticketing agent who sold an air ticket to an individual customer is responsible for the collection of payment for the ticket sold by him or her from the individual customer with or without an account.

28.  Mr. Yuen claimed that for clients with credit accounts, the ticketing agent is required to check the particular client’s credit status by accessing the client’s file before issuing the air ticket.  Should he/she find that the client had exceeded its credit limit, he/she is required to inform the client of it and to issue the ticket only after outstanding payments have been settled.

29.  Based on the evidence of Mr. Yuen which I find to be consistent and credible I am satisfied that the Plaintiffs had at the material time, a sales record system that required all their ticketing agents to record all sales orders into the Plaintiff’s computer record at the time of ticket issuance whether the customer paid in cash or purchased on credit.  It would be impossible for the Plaintiffs’ accounts department to locate records of tickets sold by their ticketing agents otherwise.  This is particular so since the Plaintiffs had 4 branches in Hong Kong and Kowloon at the relevant period and its accounts department was located at the Causeway Bay office.  It would be unreasonable to expect the accounts department to visit each of the 4 branches on a regular basis in order to compile a record of all air tickets sold.  It makes better sense for the ticketing agents in all of the 4 branches to enter all sales orders in the computer sales record systems which was linked to the accounts department in the Causeway Bay office.

Duty to demand payments from customers

30.  Miss Choi claimed it was the responsibility of the accounts department to demand payments from credit customers.  She claimed further that the accounts department would received a BSP report from the airlines against which the accounts department would check with the Plaintiffs’ own record of tickets sold before settling payments to the airlines.  Consequently, it is the duty of the accounts department to check the BSP report against the agent coupons for all tickets issued by ticketing agents.  The accounts department would then be required to demand payments for outstanding payments from customers with credit accounts.

31.  Mr. Yuen and the 1^st Plaintiff’s former accounts clerk Mr. Law Wai Yip (PW1) both agreed that the accounts department has the duty to demand payments from customers with credit accounts.  They, however, disagreed that the only record of sales would be the agent coupons placed in the tray on the ticketing agents’ counter.  It was Mr. Law’s evidence that the record of sales orders should appear in the computer entry made by the ticketing agents in the Plaintiffs’ sales record systems.  When Mr. Law found in October 2002, that the number of tickets issued recorded in the BSP report did not tally with the entries in the 1^st Plaintiff’s sales record systems, he asked Miss Choi to follow it up.  At the time, he believed Miss Choi had failed to keep up with the entry of sales orders and collection for payments.  Miss Choi agreed to follow the matter up.

32.  It is Mr. Law’s evidence that Miss Choi had failed to inform him the progress of her follow up action in the weeks that followed.  He began to remind Miss Choi on a weekly basis that she should be collecting payments from customers for the outstanding accounts.  On each occasion, Miss Choi told him she was following it up.  Mr. Law claimed that Miss Choi admitted to him the outstanding payments were for tickets issued by her and promised him that she would be able to procure settlement of all outstanding payments by the end of 2002.  She asked him not to inform his supervisor of it.  He agreed that Miss Choi did obtain payments for part of the outstanding sum but when she failed to obtain full settlement of the entire outstanding sum in early January 2003, he reported the matter to Miss Ng, the senior accounting supervisor.  Subsequently, the matter was taken over by Mr. Yuen.

33.  I find Mr. Law to be an honest witness.  Mr. Law was dismissed in January 2003 by the 1^st Plaintiff for his failure to report the matter as soon as he discovered the discrepancies in the sales record systems and the BSP.  Mr. Law gave evidence as an independent witness with little to gain.  It is not disputed that Mr. Law and Miss Choi were on good terms while they were both employed by the 1^st Plaintiff.  Miss Choi admitted her friendship with Mr. Law.  She claimed that she agreed to follow up the outstanding payments as a favour to Mr. Law.

34.  I do not accept Miss Choi’s evidence that she agreed to follow up Mr. Xu’s outstanding account as a favour to Mr. Law.  She admitted she alone had the contact details of Mr. Xu and she had been in daily contact with Mr. Xu during the relevant period of time.  Furthermore, she admitted Mr. Xu had entrusted her with a cheque book, with 8 – 10 of the cheques signed by Mr. Xu in blank.  She further admitted that she would only issue cheque payments to the 1^st Plaintiff after she received instructions from Mr. Xu that he had money in his bank account.

35.  I find Miss Choi’s evidence to be self-serving and exculpatory.  Her evidence on the responsibility in making entries in the Plaintiffs’ sales record systems only arose when cash payment was received by her was completely unreliable.  It defies reasons or logic for a travel agency to allow its ticketing agents to make no record of sales whether by hand written notes or computer entries of sales orders when air tickets were sold.

36. Furthermore, I do not accept the evidence of Miss Choi that she had no access to the particulars of Mr. Xu’s account recording his credit status as ‘0’ days credit or her ignorance that all of Plaintiffs’ credit account customers were corporations, and all individual customer accounts were COD accounts.  She had 7 years experience in the travel agency business, she had 1½ years experience as a ticketing agent before joining the 1^st Plaintiff in March 2001.  Even Mr. Chan (DW2) a witness called by the Defence, who had worked for 2 months in 2002 for the 1^st Plaintiff possessed the knowledge that all credit account holders at the 1^st Plaintiff were corporations and no individual had a credit account with the 1^st Plaintiff.  It follows that Miss Choi who had worked for almost 2 years at the 1^st Plaintiff as a ticketing agent should be ignorant of the Plaintiff’s ticketing procedures.  It is certainly contrary to the evidence of Mr. Law and Mr. Yuen for Miss Choi to claim she had not been trained to operate the ticket sales procedures of the Plaintiffs.  It is unimaginable for Miss Choi who was employed as an experienced ticketing agent to be able to maintain her employment for 2 years with the 1^st Plaintiff without possessing the most basic knowledge of air ticket sales that all sales required the recording of sale orders be it a handwritten record or computer entry whether the ticket had been paid in cash or not.

37. There are a number of discrepancies between Miss Choi’s evidence in Court and her witness statements.  She admitted in her witness statement that after Mr. Xu’s account was set up at the 1^st Plaintiff, whenever Mr. Xu purchased an air ticket, the ticketing agent would debit the sale in Mr. Xu’s account (see para. 4 at p. 52 of the bundle).  Yet in her cross-examinations, she claimed she meant she had merely put the agent coupon, recording Mr. Xu’s account number and the PNR (passenger name register) in the tray on the counter, and it was up to the accounts department to check this record.  From the documents exhibited, a PNR code appeared on each agent coupon issued (see p. 98 – 139 of the bundle).  I assume Miss Choi meant the PNR code on the agent coupon would identify each ticket issued.  But this does not explain the changes in her evidence that the ticketing agent would debit each sale on Mr. Xu’s account.  It is exactly this step that Mr. Law found she failed to take in October 2002.

Did Miss Choi procure Mr. Law to conceal the failure to keep a record of the sale of tickets to Mr. Xu?

38. Based on Mr. Law’s evidence and also based on Miss Choi’s own report of 6 February 2003 (Exh. D1), Miss Choi admitted that Mr. Law did question her about the failure to make ticket sales entries in the system.  Miss Choi had asked Mr. Law to give Mr. Xu until the end of the year to settle the outstanding account because Mr. Xu’s creditors failed to make payments and he had liquidity problems. 

39. In this report, she further admitted that Mr. Law did repeatedly asked her about the ticket sales and settlement of payments by Mr. Xu.  Her report of 6 February 2003 is consistent with the evidence of Mr. Law.  I am satisfied the report of 6 February 2003 was closer to the truth than either her witness statements or evidence in Court.

40. Based on the evidence of Mr. Law and on a balance of probabilities, I am satisfied that she did procure Mr. Law to conceal the outstanding payments of Mr. Xu from the senior management of the 1^st Plaintiff.

The 10 February 2003 Confirmation Report

41. It is unlikely that the 10 February 2003 confirmation was signed under duress.  Miss Choi admitted she typed out this document at home after she was instructed by Mr. Yuen to write a report on Mr. Xu’s account.  She admitted she composed it at home and printed it out at the office the next day.

42. At the time, with Mr. Xu’s signed blank cheques in her possession, she confirmed and agreed to go to Mr. Xu for full settlement of all outstanding payments within 3 months.

43. The Plaintiff denied that it had put any undue pressure on the Defendant to write the report of 10 February 2003.  Mr. Yuen’s evidence was the 10 February 2003 confirmation report was written by the Defendant after she agreed that if the 1^st Plaintiff’s Wholesale Travel Division did not go to the police or take up legal action against her and Mr. Xu, she would procure Mr. Xu to pay up all outstanding payments within 3 months.  She further confirmed that if Mr. Xu failed to settle all outstanding payments within the time, she would be responsible for the payment herself.

44. I am satisfied, based on the evidence adduced, the Defendant’s two confirmation reports were written on the Defendant’s own volition.  They were both written by her on the computer.  She admitted she had written the 10 February 2003 report at home on her computer, saved it on a floppy disc and printed it the next day in the office.  This demonstrated that she had ample time to reflect her own position and the circumstances and to talk to Mr. Xu.  The early report of 6 February 2003 I find was a true reflection of the circumstances and contained facts known to the Defendant at the time.  I accept this report to be truthful.  I reject her subsequent self-serving evidence that Mr. Law did not approach her until January 2003.

45. I am satisfied that Miss Choi did ask for time for Mr. Xu to settle the payments.  In spite of the unpaid air-tickets issued up to October 2002 for which she was warned by Mr. Law, she continued to issue tickets on Mr. Xu’s instructions in November, December 2002 and January 2003 without demanding settlement from him for all the previously issued tickets purchased by him.  By continuing to issue tickets to Mr. Xu without demanding immediately payments in spite of repeated reminders from Mr. Law, she failed to protect the Plaintiff’s interests.

46. Based on the evidence of the Plaintiff’s witnesses, on a balance of probabilities, I am satisfied that Miss Choi was duty bound to enter the sales orders in the Plaintiff’s record.  Miss Choi had failed to make entries of sale orders in the Plaintiff’s sales record systems because she knew Mr. Xu was not able to settle the payments for the tickets issued at the time from her daily telephone contacts with him.  I accept Mr. Yuen and Mr. Law’s evidence that Miss Choi as a ticketing agent could and should access the Plaintiff’s file on Mr. Xu which would show that Mr. Xu’s account was a COD account and she was required to enter each and everyone of the sales in his file so that both the ticketing agent and the accounts department would know of Mr. Xu’s outstanding balance.

47. I am also satisfied that Miss Choi had concealed Mr. Xu’s outstanding payments from the Plaintiffs by her failure to enter the sales orders of tickets issued to Mr. Xu in the Plaintiffs’ sales records systems and procured Mr. Law not to inform senior management of the sale of the said 121 tickets to Mr. Xu between September 2002 and January 2003.  Her conduct had therefore caused the Plaintiffs to suffer loss and damage. 

48. Miss Choi knew the effects of her deliberate failure to make entries of the sales of the said 121 air-tickets.  She admitted she had all along kept 8-10 blank cheques signed by Mr. Xu but would only issue them to the Plaintiffs upon the instructions of Mr. Xu.  She had clearly placed Mr. Xu’s interests before that of her employer in breach of her contractual duty and fiduciary duty as a ticketing agent employed by the Plaintiffs.    

Waiver and Estoppel

49. Mr. Lam submitted that the 1^st Plaintiff could have discovered the malpractice of Miss Choi within 2 weeks when the airlines delivered the BSP reports for the Plaintiffs’ settlement of payments.  He submitted it was the accounts department’s duty to check the ticketing agents’ counter tray for the sales records of air-tickets.  By their failure to discover the missing entries, and to notice the discrepancies between the BSP and their own sales records and by failing to conduct constant checking of the ticketing agents’ tray, the Plaintiffs have waived their rights and are estopped from claiming against the Defendant.

50. I am satisfied that if Miss Choi had followed proper procedures in entering sales orders of each ticket promptly, the 1^st Plaintiff’s accounts department would have discovered Mr. Xu’s account had been outstanding within 2 weeks of each sale or sooner.  Unfortunately, Miss Choi failed to follow the proper procedures in Mr. Xu’s account.  When Mr. Law approached her, she requested Mr. Law to give Mr. Xu time to pay up.  Clearly, Miss Choi had failed her duty to follow up payments for all tickets sold by her to cash and COD account customers.  It was her duty to know that the accounts department was only responsible for issuing monthly statements to corporate credit account customers and to demand payments from them.

51. Miss Choi’s conduct in failing to report tickets sales to Mr. Xu and procuring Mr. Law not to alert the 1^st Plaintiff’s senior management of the outstanding account of Mr. Xu while continued to issue tickets without demanding payments from Mr. Xu clearly constituted a breach of duty of care amounting to fraudulent conduct. 

52. I was referred by Mr. Lam to the judgment of Shaw J. in Bremer B Handelsgesellschaft mbH v. Mackpang [1979] 1 LLR 221 at p. 230 reproduced in the Hong Kong CFI judgment of William So v. Critchley Group PLC (HCA 9803/2000), on p. 9 of Deputy Judge Fung’s Ruling.

“… whether the conduct of a contracting party may amount to a waiver must be determined by reference to all the prevailing circumstances.  It needs not be such as to amount virtually to an express declaration that this or that right is waived or surrendered.  If in the prevailing conditions affecting the position of the parties to a contract the conduct of one of them affords a reasonable foundation for the inference that he is prepared to forgo any right or rights he may have in a certain regard and the other contracting party does draw that inference and persists in the residual contractual relationship upon that basis, then whether it is regarded as waiver or estoppel the forgoing of those rights cannot thereafter be gainsaid.”

53. “Those who come to equity must come with clean hands.”  Miss Choi’s hands were far from clean.  It was her own conduct and acts of concealment that caused the delay in the discovery by the Plaintiffs of the outstanding account of Mr. Xu.  She is not entitled to rely on the delay deliberately caused by her and the indulgence by the Plaintiffs to give her time to recover the outstanding payments from Mr. Xu as a positive act of waiver. 

Mitigation by the Plaintiffs

54. The authors of Chitty on Contract said in para. 26-095 of p. 1480 of Chitty on Contracts vol. II

“	26-095	“Reasonable steps”.  The claimant is not “under any obligation to do anything other than in the ordinary course of business”, the standard is not a high one, since the defendant is a wrongdoer.
		“The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”

55. Further, under para. 26-096, the authors said:

“The time when the claimant should have mitigated may depend on when he discovered that the defendant had broken his contractual obligation.”

The time the Plaintiffs should have discovered the breach was delayed by the Defendant’s repeatedly promising to go after Mr. Xu for payments.

56. Mr. Lam argued that the Plaintiffs should have accepted Mr. Xu’s offer through Miss Choi to pay by instalments of $50,000 or payment by a post-dated cheque.  In fact, this offer was made after the Plaintiffs through Miss Choi gave Mr. Xu 3 months to settle all outstanding payments.  Up to May 2003, Mr. Xu had only settled $136,245 between 20 January and 15 May 2003 in spite of the promises he made to the Plaintiffs through Miss Choi.  Mr. Yuen said in Court that after repeatedly failing to honour his words, he could no longer accept Mr. Xu’s offer of payment by a monthly installment of $50,000 to settle the outstanding $747,199.20.

57. If Mr. Xu had honoured his debts, he would have settled the outstanding debts whether it be before or after the Plaintiffs’ present proceedings against Miss Choi commenced on 11 June 2004.

58. Miss Choi admitted that all along she alone had Mr. Xu’s contact address and telephone number in China.  She was the only person at the Plaintiffs’ office in contact with Mr. Xu.  It is therefore reasonable for the Plaintiffs to expect Miss Choi to assume the responsibility to recover the outstanding debt from Mr. Xu.  They had allowed her a reasonable time to do so. 

Defendant’s duty to indemnify her employer

59. In para. 39-056 of Chitty on Contracts vol. II, the authors have this to say:-

“

39-056

Duty to exercise reasonable care.  Even where the employee does not profess a particular skill or competence requiring training or experience, there is an implied term in the contract that he will exercise reasonable care in the performance of his duties.  Breach of this duty will not entitle the employer to dismiss the employee summarily unless the breach goes to the root of the contract, but it may give rise to an obligation to indemnify the employer.”

60. In para. 39-058 of Chitty on Contract vol. II, it states:-

“Duty of fidelity.  It is another implied term in a contract of employment that the employee will serve the employer with fidelity and in good faith.”

61. In para. 39-068 of Chitty on Contract vol. II.  The authors further stated:-

“

39-068

Duty to indemnify the employer.  If the employee, in breach of his duty to his employer to exercise a reasonable degree of competence in a particular skill or to take reasonable care in his work, causes damage or injury by his negligence to a third person, and the employer pays damages to the third person on account of his vicarious liability for the employee’s tort, the employer can recover an indemnity from his employee.  It is arguable that the indemnity need not be based on an implied term in the contract of employment to the effect that the employee undertakes to indemnify his employer in these circumstances (although courts have put it on this ground); it can be based on the breach of the employee’s contractual duty to take care, with the measure of damages for that breach being the amount paid to the third person (which is a reasonably foreseeable loss resulting from that breach).”

62. I find Miss Choi’s evidence in Court deliberately evasive and untruthful.  I have no hesitation in rejecting her evidence of her ignorance that ticketing agents are required to make entries in the Plaintiffs’ record systems of all sales orders and to demand immediate payments from all COD customers upon issuance of air-tickets.

63. On the other hand, I am not satisfied without the support of any evidence of the conditions and terms of the account opening contract making Miss Choi responsible for the repayment of outstanding liability of Mr. Xu when she made the initial application for setting up a COD account at the 1^st Plaintiff’s Wholesale Travel Division.  Neither am I prepared to accept that without an agreement to that effect at the time of the setting up of Mr. Xu’s account, Miss Choi’s acceptance of liability under her confirmation report of 10 February 2003 can or should be enforced.  Miss Choi’s liability is based on the breach of her implied duty of care and fiduciary duty under her employment with the Plaintiffs.

64. I am satisfied that Miss Choi was liable because she failed in her duty as a ticketing agent to protect her employer’s interests and knowingly gave away properties belonging to her employer entrusted to her care.  I therefore give judgment to the Plaintiffs against the Defendant in the sum of $747,199.20.

65. Interests on the judgment sum from the date of writ to the date of judgment at ½ judgment rate and thereafter at full judgment rate.

66. Costs nisi – at the close of evidence stage, I have made an order of all costs thrown away against the Plaintiffs when I allowed the 2^nd Plaintiff to amend the Statement of Claim to join the 1^st Plaintiff.  Costs thereafter be to the Plaintiff’s to be taxed if not agreed with certificate for counsel.