ANTHONY MACKAY v. CHI-X ASIA PACIFIC HOLDINGS LTD

HCA 776/2021

[2024] HKCFI 2901

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 776 OF 2021

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J U D G M E N T

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I.  INTRODUCTION

1.  In a perfect world, agreements would all be reduced into writing so that, if there should ever be disagreement, it should be relatively straightforward to ascertain the terms reached by the parties. Unfortunately, in the real world, this is not always possible and does not always happen. Instead, agreements or understandings which are meant to be binding are often concluded orally, but not recorded in written form, usually because the parties are eager to move on to the next stage in their business relationship. This case concerns the latter situation in the context of an employment agreement.

2.  An executive commences work for a company on a “my word is my bond” or handshake basis. Because of urgency, the executive begins work immediately, despite the terms of a written contract of employment having yet to be fully negotiated among the parties and their lawyers. At an early stage of their business relationship, the parties fall out. The company contends that the executive’s working style does not suit its needs and terminates the executive’s employment. The executive claims that there was a legally binding oral agreement, reached prior to the commencement of work, that the company would accord certain benefits regardless of the termination of the executive’s employment. The executive stresses that one would not have started working for the company unless those benefits had been orally assured beforehand. The company denies the alleged entitlements. In support, the company points out that the executive’s written employment contract, signed after the executive started working for the company, says nothing about the executive’s purported benefits.

3.  There will typically be scant record of what was said between the parties prior to the executive starting to work for the company. The executive might not be able to pinpoint the exact moment when supposed benefits were agreed, as opposed to having been merely discussed or understood as something that the executive would be entitled to “in principle,” subject to further negotiation among the parties’ lawyers to work out details. The executive nonetheless insists that there was a definitive agreement on core entitlements. The company disagrees. It is one side’s word against the other and the main issue which the court must decide is which version of events to accept. The court’s inquiry in such situations is fact-sensitive, involving the assessment of the parties’ competing accounts against the background of contemporaneous documents and the balance of probability.

4.  JC Flowers & Co (JCF), a private equity firm based in New York acquired assets (the Chi-X Assets) from Nomura and Instinet. The Chi-X Assets included Chi-X Australia Pty Limited (Chi-X Australia) and Chi-X Japan Limited (Chi-X Japan), To implement the acquisition, JCF incorporated Chi-X Holdings Limited (CXH) and the defendant (Chi-X AP) (a subsidiary of CXH) to operate as special purpose vehicles to hold the Chi-X Assets. The acquisition was accomplished with the assistance of the plaintiff Mr Mackay. At the time of the acquisition, on the strength of Mr Mackay’s previous experience with Nomura and Instinet, JCF believed that it was important to have Mr Mackay on board to develop Chi-X AP’s business. Talks between JCF officers and Mr Mackay ensued. Mr Mackay claims that, on or about 28 February 2016, he reached an oral agreement with Chi-X AP, acting through Mr Thierry Porte (JCF’s vice-chairperson) and Mr Peter Yordan (a JCF managing director), whereby Mr Mackay would be employed as Chief Executive Officer (CEO) at Chi-X AP with an annual salary of US$500,000 and certain core entitlements. Those core entitlements (according to Mr Mackay) included participation in a Long-Term Investment Plan (LTIP) and a guaranteed first-year bonus of US$500,000 regardless of whether Mr Mackay’s employment at Chi-X AP was terminated before the conclusion of his first year.

5.  On 1 March 2016 Mr Mackay started working for Chi-X AP even though the terms of a written employment contract were still under negotiation among Mr Mackay, Chi-X AP, and their lawyers. An Employment Contract between Chi-X AP and Mr Mackay was eventually signed on 11 July 2016. The Employment Contract was backdated to 1 March 2016 to reflect the fact that Mr Mackay commenced working for Chi-X AP on that date. However, Chi-X AP failed to report Mr Mackay’s employment to the Inland Revenue Department (IRD) within the 3 months required by law. Following discussions between the parties, it was agreed that to remedy the anomaly Mr Mackay would sign an amended Employment Contract. This was done on 1 September 2016. Apart from its execution date and the stipulation that Mr Mackay’s employment with Chi-X AP commenced on 1 April 2016, the amended Employment Contract was the same as the original Employment Contract. Neither the original nor the amended Employment Contract provided for a guaranteed first year bonus of US$500,000. Instead, they stated that Mr Mackay would be entitled to the payment of an annual bonus “based on his performance and the profitability of the Company and the Group for each financial year ended 31^st March”. The original and amended Employment Contracts further stipulated that “the payment of any such bonus and the amount thereof will be determined by the Board in its absolute discretion” and any bonus “shall not be made conditional upon the Executive continuing to be employed on the date of payment of the bonus”.

6.  Simultaneously, negotiations over the terms of an LTIP for senior employees of Chi-X AP (including Mr Mackay) were ongoing among the parties and their lawyers (Robertsons for Chi-X AP, Tanner de Witt for Mr Mackay, and Pinsent Mason for the senior employees of Chi-X AP). Those negotiations culminated in a meeting between Mr Mackay and Mr Yordan in Hong Kong on 1 September 2016, the day on which the amended Employment Contract was signed. At the meeting, Mr Mackay was presented with the latest draft LTIP terms. Mr Mackay was told that he would be entitled to 1,645,649 shares under the LTIP scheme. He was asked to sign his agreement to the LTIP scheme. But Mr Mackay did not do so, instead saying that he would first “need to check the numbers”. Although he never signed on to the LTIP, Mr Mackay says that he orally communicated his acceptance of the 1,645,649 LTIP share allocation to Mr Yordan on the day after the meeting. As a result, Mr Mackay contends that, pursuant to the terms of the draft LTIP scheme that he was shown, 56.5% of his LTIP share entitlement vested in him between 2 September 2016 and the date when Chi-X AP ended his employment.

7.  The relationship between JCF and Mr Mackay quickly went sour. There was a clash in views on how Chi-X AP should be run. Alarmed that Chi-X AP was experiencing significant losses, JCF believed that it was imperative to impose rigorous cost controls and concentrate Chi-X AP’s efforts on the Japanese and Australian markets. Mr Mackay had grander plans and thought that JCF needed to inject significantly more cash into Chi-X AP to turn it into a profitable business. The clash led Chi-X AP to terminate Mr Mackay’s employment by letter dated 11 November 2016. Thereafter, pursuant to the amended Employment Contract, Mr Mackay went on garden leave until 10 May 2017.

8.  In these proceedings, Mr Mackay claims the following from Chi-X AP:

(1)  remuneration for work done in March 2016 and interest for late payment of salary,

(2)  outstanding Occupational Retirement Scheme Ordinance (ORSO) payments,

(3)  outstanding Mandatory Provident Fund (MPF) payments,

(4)  unpaid annual leave,

(5)  reimbursement of Pinsent Mason fees and DotCod expenses,

(6)  a guaranteed bonus of US$500,000, and

(7)  unpaid entitlement under the LTIP scheme presented to him on 1 September 2016.

Mr Mackay’s claims for items (1) through (5) arise out of the original or amended Employment Contract. The claims for items (6) and (7) arise out of the oral contract which Mr Mackay says that he reached with Mr Porte and Mr Yordan by 28 February 2016.

II.  DISCUSSION

A.  Claims arising out of the Employment Contract

A.1  Remuneration for work in March 2016 and interest for late payments of salary

9.  The issue is when Mr Mackay’s employment commenced.

10.  Inland Revenue Ordinance (Cap.112) section 52(4) provides that an employer must give notice in writing to the IRD of a person’s employment “not later than 3 months after the date of commencement of such employment”. Mr Mackay started his employment with Chi-X AP on 1 March 2016 pursuant to the original Employment Contract. Chi-X AP therefore ought to have (but did not) inform the IRD of Mr Mackay’s employment no later than 1 June 2016. To rectify the omission, it was agreed between Chi-X AP and Mr Mackay that the original Employment Contract would be replaced with the amended Employment Contract stipulating 1 April 2016 as the starting date for Mr Mackay’s employment. This workaround left unresolved the question of what to do with Mr Mackay’s remuneration for the month of March 2016. There were suggestions about (1) converting what was due to Mr Mackay for March 2016 into equity in CXH or (2) treating Mr Mackay as having been Chi-X AP’s consultant in March 2016. Nothing resulted from either suggestion. There was no conversion of the remuneration into equity and no consultation agreement for March 2016 was ever executed.

11.  In my view, regardless of what the amended Employment Contract stated, the reality is that Mr Mackay started working at Chi-X AP as an employee from 1 March 2016. He must consequently be entitled to remuneration for his work in that month. Chi-AP is therefore liable for one month’s salary (US$41,666.67) plus interest thereon.

12.  As for interest on late salary payments, Mr Mackay calculates this at US$23,974.83. Chi-X AP pleads no positive case against this figure. I accordingly accept that US$23,974.83 is due to Mr Mackay as interest on late salary payments.

A.2  Outstanding ORSO contribution

13.  By clause 7 of the original and amended Employment Contracts, Chi-X AP was to contribute an amount equal to 10% of the basic salary paid to Mr Mackay into an ORSO scheme. The dispute arises because Chi-X AP has not made an ORSO contribution in respect of Mr Mackay’s remuneration for March 2016. Mr Mackay thus claims an ORSO contribution in the amount of US$4,166.67. Given my determination in [11] above, Mr Mackay must be entitled to an ORSO contribution for March 2016.

A.3  Outstanding MPF payments

14.  Chi-X APP failed to make any MPF contribution during Mr Mackay’s employment. The question is whether Mr Mackay has a personal cause of action against Chi-X AP for the unpaid contributions. Mr Mackay claims MPF contributions totalling $21,000.

15.  Under Mandatory Provident Funds Scheme Ordinance (Cap. 485) section 45G(1):

“[a] person who has sustained financial loss that is attributable ... (b) to the failure of another person to perform a duty ... imposed on that other person by or under this Ordinance ... is entitled, by proceedings brought in a court of competent jurisdiction, to recover from that other person the amount of that loss as damages.”

16.  Mr Mackay claims the unpaid MPF contributions by reference to the latter provision. To succeed, he needs to show that he has suffered financial loss from the failure by Chi-X AP as employer to pay MPF contributions. According to Mr Mackay, Chi-X AP’s failure to pay contributions has caused him financial loss by depriving him of the benefit of the amounts that Chi-X AP ought to have paid.

17.  I am not persuaded that Mr Mackay is entitled to this head of claim. If section 45G(1) was intended to enable an employee automatically to sue an employer for unpaid MPF contributions without more, one would have expected the provision to state so directly. Instead, the provision requires an employee to show that (1) he or she has sustained financial loss and (2) such loss is attributable to the employer’s failure to pay contribution. In support of his claim, Mr Mackay is not relying on anything apart from the bare fact that MPF contributions have not been paid. He has not adduced evidence of (a) the MPF scheme to which Chi-X AP’s contributions would have been made or (b) the quantum of profits which such scheme would have made over a relevant period if the requisite contributions had been made. Because the value of an MPF scheme will fluctuate over time, the mere fact that an employer has not paid contributions over some period will not necessarily mean that an employee has suffered financial loss or damage in the amount of the unpaid MPF contributions. In the absence of the requisite evidence, I am unable to accept Mr Mackay’s claim.

A.4  Unpaid annual leave

18.  Clause 9 of the original and amended Employment Contracts provides:

“9.1 In addition to the general public holidays (excluding Sundays), the Executive shall be entitled to 30 working days' paid annual leave (inclusive of statutory annual leave) for each calendar year, which will be the leave year.

9.2 Annual leave is to be taken at times mutually agreed in advance with the Board.

9.3 Annual leave may not be carried forward from one leave year to the next for a period of more than 90 days unless agreed in writing by the Board. No payment in lieu will be paid for annual leave not taken.”

19.  Mr Mackay says that he never took annual leave during his employment with Chi-X AP. I accept this. There is no evidence of Mr Mackay having taken any leave while employed by Chi-X AP.

20.  Mr Mackay claims pay in lieu of annual leave for his time at Chi-X AP. He says the pay in lieu amounts to US$4,109.59 (3 days’ leave) for March 2016; US$31,616.44 (23 days’ leave) for the period from April to December 2016; and US$15,068.49 (11 days’ leave) for the period from January to May 2017. He received US$14,636.89 from Chi-X AP on 21 June 2017 as payment in lieu for 2017. But this leaves a shortfall for 2017 (Mr Mackay contends) of US$431.60 (that is, US$15,068.41 minus US$14,636.89). For 2016, US$35,616.44 (26 days’ leave) is said to be outstanding.

21.  There are two issues under this claim.

22.  First, the shortfall of US$431.60 for 2017 arises because Mr Mackay calculated his figure of US$15,068.49 on the premise of 11 days leave. In contrast, Chi-X AP based its payment of US$14,636.89 on 10.68 days leave. Mr Mackay in fact also obtained a figure of 10.68 days leave, but he rounded this up to 11 days for the purposes of calculating payment in lieu. No justification is given for rounding the 10.68 to 11 days in the calculation of payment in lieu. Employment Ordinance (Cap.57) (EO) section 41AB(3)(b)(ii) [1] provides for the rounding up of a fraction of a day to a whole day in the situation where an employee takes leave as a matter of fact. But the section does not say that, when calculating payment in lieu of leave, an employee can similarly round up a fraction of a day. Accordingly, I am unable to allow the claimed shortfall of US$431.60.

23.  Second, on the payment in lieu of annual leave for 2016, the question is the validity of the last sentence of Clause 9.3 to the effect that “[n]o payment in lieu will be paid for annual leave not taken”. Mr Michael Lok (counsel for Mr Mackay) submits that the sentence is void by reason of EO sections 41AB(3)(b)(ii) and 70[2]. Mr Lok argues that, because Clause 9.3 restricts an employee’s right to carry statutory annual leave forward, it contravenes EO section 41AB(3)(b)(ii) and should be treated as void by EO section 70. I disagree. Statutory annual leave in Hong Kong is significantly less than 90 days. Clause 9.3 entitles an employee to carry forward up to 90 days annual leave from one leave year to the next. In those premises, it is difficult to see how Clause 9.3 prevents the carrying forward of statutory annual leave in contravention of EO section 41AB(3)(b)(iii). In my view, Clause 9.3 is valid.

A.5  Reimbursement of Pinsent Mason fees and DotCod expenses

24.  Mr Mackay seeks reimbursement of fees paid by him to Pinsent Mason on behalf of the employees of Chi-X AP and for meal expenses at DotCod (a restaurant) incurred by him while working on behalf of Chi-X AP. The total claimed is $56,033. The expenses seem reasonable. The amounts have not been queried by Chi-X AP which is accordingly liable to reimburse the same pursuant to Clause 11 of Mr Mackay’s original or amended Employment Contract.

B.  Claims arising out of the alleged oral contract

B.1  Guaranteed bonus of US$500,000

25.  The crux of this claim is whether by 28 February 2016 Mr Mackay and Chi-X AP (acting through by Mr Porte and Mr Yordan) had orally agreed that Mr Mackay would be entitled to a bonus of US$500,000 at the end of his first year, regardless of whether Mr Mackay’s employment was terminated beforehand. I am not satisfied that there was such an agreement.

26.  Mr Lok submits that Mr Porte accepted in cross-examination that there was an oral agreement on a guaranteed bonus. Mr Lok relies on the following passage:

“Q: Now, going back to this email, would you agree with me that the plaintiff at this stage was just asking for the minimum parameters, which means a minimum of US$500,000 as bonus?

A: We did finally land on that, yes.

COURT: When you say "finally land on that", when did you finally land on that?

A: It must have been a few months after that, I would say.

COURT: After that?

A: Yes.

COURT: Referring to this --

A: This is January, so possibly by February.

MR LOK: Thank you.”

27.  Mr Lok stresses that the context of his cross-examination was an email dated 20 January 2016 in which Mr Mackay wrote to Mr Porte:

“I’m not asking for [a bonus of] $3m – you know from my earlier notes that I well know the business cannot support that. What I’m saying is that $0-500 is wrong as well. The proposal for the ratchet is to provide the upside of performance is delivered.

The market may have moved, but I was put on that $3m number by Ed Nicoll/John Fay after the SLP deal because they knew what I did to get the value to where it got to. Nomura agreed to keep me on that because they made more than 5X on Chi-X Europe. I also got $5m of Nomura stock and some of the $3m was in stock as well. The stock fell 90% so I know the ups and downs of the game.

Tal was getting $1m bonus and is walking away with $5-10m from his equity. I’m not coming from that pay-out and I’m putting my skin in the game from scratch. I’ve replied that I can put in 50% more cash than first indicated.

The business needs a CEO so if you were to hire from the market you would need a competitive package which. The reason my former bosses are willing to back this is they have seen me work. They know the PE business as well. They set my comp under those conditions.

We are not far apart, but the basics do have to be right.”

28.  Mr Lok suggests that, seen in the context of the 20 January 2016 email, Mr Porte’s answer conceded that the parties had agreed that Mr Mackay would receive a guaranteed US$500,000 bonus at the end of his first year.

29.  But, in my view, all that Mr Porte accepted was that: (1) in January 2016 Mr Mackay asked for a minimum bonus of US$500,000 and (2) in February 2016 the parties had “finally landed” on an understanding that, if there was to be a bonus, it would be for at least that amount. I do not understand Mr Porte as accepting that a bonus of US$500,000 was guaranteed to Mr Mackay in his first year, come what may and regardless of Chi-X AP’s performance. If a guaranteed bonus of US$500,000 had been agreed, it is remarkable that none of the term sheets of Mr Mackay’s remuneration package produced before he commenced work on 1 March 2016 refer to a guaranteed bonus in his first year. Instead, the term sheets provided to Mr Mackay refer to his bonus as being “based on Remco [Remuneration Committee] determination based on development of business” or “based on Remco determination based on development of business and net free cash flow in sufficient surplus”.

30.  The principal difficulty with Mr Mackay’s case of an oral agreement for a guaranteed bonus is that no document passing between himself and Mr Porte or Mr Yordan, before or after the start of his employment on 1 March 2016, refers to such an agreement or understanding having been reached. By contrast, what appears in the original and amended Employment Contract contradicts Mr Mackay’s position. Following detailed discussion among the parties and their lawyers, before and after 1 March 2016, the latter contracts simply stated in their Clause 6.3:

“In addition to the salary specified in clause 6.1, the Executive shall be entitled to payment of a bonus based on his performance and the profitability of the Company and the Group for each financial year ended 31^st March. The payment of any such bonus and the amount thereof will be determined by the Board in its absolute discretion. Any bonus awarded shall be paid in full, without deduction or set off and shall not be made conditional upon the Executive continuing to be employed on the date of payment of the bonus or no notice of termination of employment having been given. Bonus will be paid in full no later than 31^st May in each year.”

What was agreed in Clause 6.3 is consistent with what was sketched out in respect of a bonus in the term sheets mentioned in [29] above.

31.  Mr Mackay suggests that Clause 6.3 is similarly consistent with his case, because the oral understanding that he alleges solely concerned his first year of employment. By contrast, Clause 6.3 was intended to apply to his entire employment, which had been expected to continue for several years. However, I find it remarkable that, at no point did anyone, including Mackay, see fit to include the words “Save for the first year of employment for which period the payment of a bonus has been guaranteed” at the start of the second sentence of Clause 6.3. This could easily have been done. Clause 6.3 is instead categorical in its terms: “The payment of any such bonus will be determined by the Board in its absolute discretion”. Mr Mackay says that, in his experience, guaranteed bonus agreements are typically concluded orally and not reduced into writing. But, by itself, that observation is a neutral factor. Given the documentary evidence in this case, the observation does not make it more likely that there was an agreement of the sort for which Mr Mackay contends.

32.  Mr Mackay asserts that, since he had received a US$3 million bonus from his previous work with Nomura and Instinet, he would not have agreed to become CEO at Chi-X AP without the promise of a guaranteed bonus of at least US$500,000. However, the evidence suggests that Mr Mackay was persuaded to come on board as CEO of Chi-X AP by the key aspects identified in the term sheets provided to him by Mr Porte and Mr Yordan, including an annual salary of US$500,000 and participation in an LTIP. There is also the fact that Mr Mackay would receive a finder’s fee of US$250,000 if he could successfully bring about the acquisition of the Chi-X assets by JCF. Given his prior experience at Nomura and Instinet, Mr Mackay’s willingness to take the helm at Chi-X AP would have made the acquisition more attractive to JCF and the conclusion of the deal with Nomura more likely.

33.  I am fortified in my thinking by Mr Mackay’s pleading on his supposedly guaranteed bonus. As Ms Frances Lok SC for Chi-X AP has pointed out, that pleading has morphed over time. In his original Statement of Claim dated 20 May 2021, Mr Mackay merely averred that, in or around 28 February 2016, there was an oral agreement that Mr Mackay “would be eligible to receive an annual cash bonus of up to US$500,000 per annum, paid, at the discretion of the board with consideration to the established payout ratios of the Defendant's subsidiaries, after the financial year end”. It was not until the Re-Amended Statement of Claim dated 7 February 2024, that Mr Mackay’s case was changed to plead that Mr Mackay “shall receive a cash bonus of US$500,000 for his first year of employment” and only “in subsequent years of employment” would Mr Mackay “be eligible to receive an annual cash bonus of up to US$500,000 per annum paid, at the discretion of the board with consideration to the established payout ratios of the Defendant's subsidiaries, after the financial year end”. The pleading was further embellished in the Re-Re-Amended Statement of Claim dated 3 September 2024 with the addition of the following sentence: “It was agreed that the amount of bonus reflects [Chi-X AP’s] recognition of [Mr Mackay’s] efforts and contributions in the Acquisition. including [Mr Mackay’s] successful introduction of the sale of Chi-X Assets to JCF as well as [Mr Mackay’s] efforts in securing the Acquisition Terms”. If it had been obvious to Mr Mackay that a guaranteed bonus of US$500,000 had been orally agreed by 28 February 2016, one would have expected his original Statement of Claim to have so stated outright.

34.  Mr Lok submits as an alternative case that, if there was no guaranteed bonus, Chi-X AP nonetheless breached Clause 6.3 of the original and amended Employment Contract by failing to award a bonus to Mr Mackay. Mr Lok argues that, in refusing any bonus to Mr Mackay, Chi-X AP’s board failed to exercise its discretion under Clause 6.3 in accordance with its common law duty of rationally and good faith (Braganza v BP Shipping Ltd [2015] 1 WLR 1661). More specifically, Mr Lok says that Chi-X AP’s board failed to consider the following factors:

(1)  Mr Mackay’s salary was low relative to the rest of the industry and hence the bonus was important to him.

(2)  Industry practice is for senior management to receive substantial amounts as bonus.

(3)  The fact that Chi-X AP had not made a profit at the time of Mr Mackay’s departure should not be a significant factor in the award of bonus. Chi-X AP’s poor financial position at the time should not be attributed to Mr Mackay.

(4)  Mr Mackay had assisted Chi-X AP to acquire the Chi-X Assets.

(5)  Mr Mackay was not summarily dismissed.

(6)  Mr Mackay had used his own resources to fund Chi-X AP’s business when Chi-X AP had no bank account or ready access to cash.

(7)  Mr Mackay had provided valuable services as CEO.

(8)  A nil bonus would represent that Mr Mackay’s performance was so deficient that it did not merit recognition. Such representation would be unjustified and insulting.

Mr Lok submits that, in light of the foregoing factors, I should find that Mr Mackay merited a discretionary bonus of at least US$500,000.

35.  The court must be circumspect in reviewing a board’s exercise of discretion not to grant a bonus. The court should not readily substitute what a board thought to be reasonable with what the court believes to be reasonable. In assessing Mr Mackay’s alternative case on entitlement to a discretionary bonus:

“the right test is one of irrationality or perversity ... i.e. that no reasonable employer would have exercised his discretion in this way.... In reaching its conclusion, what the court does is thus not to substitute its own view, but to ask the question whether any reasonable employer could have come to such a conclusion. (Burton J in Clark v Nomura International plc [2000] IRLR 766, at [47]).”

I am unable to conclude that the Chi-X AP board’s refusal to award a bonus was somehow irrational, perverse or lacking in bona fides.

36.  By the express words of Clause 6.3, in deciding whether to award a bonus to Mr Mackay, Chi-X AP’s board had to consider his performance as well as the profitability of the Company and the Group over the financial year. Prior to the acquisition of the Chi-X Assets, it had been thought that the US$8.9 million cash which Nomura had left with Chi-X Japan and Chi-X Australia could be transferred to Chi-X AP for use as working capital. By mid-March 2016, it became apparent that, due to regulatory requirements, the transfers from Chi-X Japan and Chi-X Australia could not be effected. This led to financial difficulties for Chi-X AP. Mr Porte consequently wrote to Mr Mackay on 16 October 2016 that Chi-X AP was “in crisis and we have limited cash . . . we cannot simply spend our investors' money on operating costs when we have not fixed key fundamental issues in our business".

37.  Mr Mackay was fired shortly thereafter because, in Mr Porte’s view, “Tony [Mackay] did not seem to get the point as to why he was not given a limitless budget to effect [certain] hires” and “Peter [Yordan] and I were astonished by Tony's attitude towards the cash crisis, as it seemed that he was persistent in proceeding with hiring without considering the financial realities faced by [Chi-X AP] during that period”. According to Mr Porte, “it became clear to Peter and I that Tony had no real idea about keeping costs under control and that he was, therefore, not suitable for the job”.

38.  Given those perceptions of Chi-X AP’s then financial predicament and Mr Mackay’s lack of suitability to handle the situation, it is difficult to see how Chi-X AP can be faulted for not awarding any bonus. Mr Mackay argues that Chi-X AP had enormous potential, and the actual problem was that JCF was starving the company of funds. Mr Mackay is entitled to his opinion which may be reasonably held by him. The point is that it cannot be said that the perception of Chi-X AP’s profitability at the relevant time was so wrong that no board of directors could have rationally reached a similar view. The allegation of a breach of Chi-X AP’s Braganza obligation of good faith is therefore not made out.

39.  Mr Mackay’s claim for a bonus of US$500,000 fails.

B.2  Unpaid LTIP entitlement

40.  Mr Mackay’s LTIP entitlement hinges on whether he orally agreed to the LTIP scheme which was put to him on 1 September 2016. He did not sign the LTIP participation schedule presented to him at the time. He instead said he wanted to check the figures. The dispute is whether he orally agreed (as Mr Mackay alleges) to join the LTIP in a phone call to Mr Yordan on or about 2 September 2016.

41.  I am unable to accept that Mr Mackay had orally signified his acceptance of the LTIP schedule by 2 September 2016 or any other date prior to the termination of his employment by Chi-X AP in November 2016.

42.  On 1 September 2016, Mr Mackay met with Mr Yordan at Robertsons Hong Kong office. Mr Lambert of Robertsons printed out the latest form of the draft LTIP. This had previously been circulated by Robertsons in an email dated 22 June 2016. Mr Lambert wrote out the number of shares (1,656,649 shares) to be allocated to Mr Mackay in a personalised schedule to the draft LTIP. Mr Yordan then asked Mr Mackay to sign the schedule. Mr Mackay did not sign, saying that he first wanted to check the numbers.

43.  Subsequently, Mr Yordan sent two emails dated 1 September 2016. The first email (timed at 12.38 pm) showed how it was intended that the LTIP pool would be allocated among Chi-X AP’s senior management. For instance, Mr Mackay would be allocated 20% of the pool, while the new Chief Financial Officer (CFO) would receive 10%, Mr John Fides of Chi-X Australia and Mr Makato Nagahori of Chi-X Japan would receive 15% each, and Mr Man Chun Tse (the Chief Technology Officer based in Hong Kong) would receive 10%. The second email (timed at 12.40 pm) contained a breakdown showing how Mr Mackay’s allocation of 1,656,649 shares had been calculated. The breakdown indicated that the figure of 1,656,649 shares was 20% of the 8,283,246 total shares to be issued to Chi-X AP’s management. According to Mr Mackay, having received the foregoing emails, he orally confirmed his acceptance of the 1,656,649 shares allocation to Mr Yordan by 2 September 2016.

44.  My difficulty with Mr Mackay’s evidence is that, on 7 September 2016, Mr Yordan emailed Mr Mackay: Do you have a proposed LTIP split you can send me? I want to get that finished off.” Mr Mackay emailed back: “I will finish it on the weekend”. On 12 September 2016, Mr Mackay emailed Mr Yordan:

“I'm about to send you the LTIP allocation as well as the correspondence that I believe included the 22.5%. The “model/split” that you were working off was from a February model where I was making different allocations for tranche 1 and 2 - the idea being some of the managers had bigger tranche 2 allocations on the basis that they would be the ones that would help deliver the extraordinary returns.”

In referring to the 22.5%, Mr Mackay’s 12 September email appears to be resurrecting and re-negotiating how many LTIP shares should be allocated to him, 22.5% rather than merely 20% of the LTIP pool. On 14 September 2016, Mr Lambert (Chi-X AP’s lawyer) emailed Mr Federico Donnett of Tanner de Witt (Mr Mackay’s solicitors): “On a separate note, did Tony confirm the amount of LTIP shares for the purposes of the schedule to the LTIP plan? When he was in our offices he did say that he was going to double check that the number was correct.” On 6 October 2016, Mr Tim Drew of Tanner de Witt emailed Mr Lambert: “I am still awaiting to hear back from Tony regarding the number of LTIP shares to be granted and will follow up with him again now.”

45.  The foregoing correspondence suggests to me that, far from agreeing the allocation of 20% shares (that is, 1,656,649 shares), Mr Mackay was still seeking a larger share (22.5%) of the LTIP pool. When I asked Mr Mackay about his 12 September email, Mr Mackay’s evidence was as follows:

“COURT: Before you do that, just looking at 4051, at the top there, you say, "I'm about to send you the LTIP allocation as well as the correspondence that I believe included the 22.5 per cent."

A: Mm-hmm.

COURT: I thought by this time we had agreed 20 per cent. Why are we talking 22.5 per cent?

A: So, what I'm referring to there was an early February model, where I was talking about the different things and I was asking for more than 20 per cent, I was asking for 22.5 per cent. But they came back to me and said, "You are only entitled to 20 per cent." So, what I'm referring to there, I think it says the model was a February model, not the final model that we worked to.

COURT: That's what you say in the next sentence but if you had superseded this, it's already all agreed at 20 per cent by this time, 12 September, why are you still sending something that refers to the 22.5 per cent?

A: Because we were looking at how the allocations had changed between February and September, when we were going to the final, you know, allocation of shares. So, as I said, the last model that we worked off on that was back in February, and then the model and the numbers that we were dealing with here were slightly different. So, I was trying to show how the allocations had changed.

COURT: What was the point of looking back? Why not look forward?

A: It was a question of how we decided who are the important people. So it was not for my allocation, it was the rest of the team. This was nothing to do with my allocation which was decided. It was about how do I allocate all the shares to in the rest of the company, in the rest of the 100 per cent pool.

COURT: All right. ”

46.  I do not think that Mr Mackay satisfactorily answered my question. If (as Mr Mackay asserted) as at 2 September 2016 he had orally agreed with Mr Yordan to a 20% share allocation, why was he still referring to 22.5% on 12 September? How exactly was the allocation of shares to the rest of the company relevant to his share, if he had already accepted 20%? On the other hand, the shares of the rest of company would be affected, if he were seeking a larger share of 22.5%.

47.  The 12 September email coupled with the correspondence between Mr Lambert of Robertsons on the one side and Mr Donnett and Mr Drew of Tanner de Witt on the other, supports the conclusion that, as at 2 September 2016, Mr Mackay had not accepted the proposed allocation of 20% or 1,656,649 shares. In the witness box, Mr Mackay suggested that the lawyers were simply unaware that he had agreed his 20% allocation of 1,656,649 shares with Mr Yordan, because neither Mr Yordan nor he had bothered to tell their respective solicitors of such agreement. Mr Mackay said that the lawyers had not been informed, because there was no need to tell them. There was no need to inform the lawyers (Mr Mackay explained in the witness box) because no further amendments were needed to his personalised LTIP schedule as he had accepted the same completely. Mr Mackay stated that, rather than wasting further time on the matter, Mr Yordan and he had moved on to consider (1) the appropriate LTIP allocations for the rest of Chi-X AP’s senior management and (2) how much Mr Mackay should co-invest in Chi-X AP to have “skin in the game”.

48.  I find Mr Mackay’s explanation to be implausible. It is surprising that neither party informed their solicitors that there had been agreement on an allocation of 1.656,649 shares to Mr Mackay, if there had been such an agreement. On the balance of probability, it is more likely that the lawyers were not so informed because there was no agreement. Indeed, if there had been agreement as alleged, one would have expected Mr Mackay to have signed his personalised LTIP schedule. That was never done.

49.  For those reasons, I cannot conclude that Mr Mackay agreed to the LTIP entitlement put to him by Chi-X AP. Mr Mackay never having agreed to the LTIP entitlement prior to leaving Chi-X AP, I do not see how it can be said that the proposed 1,656,649 shares vested in him on 1 March 2016 (the first day of his employment) or any other later date on the basis of an LTIP entitlement that he never approved.

50.  I am prepared to accept that, by late February 2016, Mr Porte and Mr Yordan on behalf of Chi-X AP had agreed that, as part of his employment at Chi-X AP, Mr Mackay would be entitled to participate in an LTIP scheme. Such agreement without more would have been too inchoate and vague to be workable on its own. Extensive negotiation on the precise mechanism and detailed terms of the LTIP scheme was needed. Such negotiation took place after 1 March 2016 when Mr Mackay commenced his employment. General terms of the LTIP scheme were settled on or about 22 June 2016. See Mr Lambert’s email to Mr Drew of that date. In good faith, Chi-X AP put forward a personalised LTIP scheduled premised on such LTIP scheme to Mr Mackay for signature on 1 September 2016. But Mr Mackay appears not to have accepted the allocation of 20% under that scheme and seems to have held out for a larger share (22.5%) of the LTIP pool. Consequently, there was no concluded agreement on Mr Mackay’s LTIP entitlement, as the size of Mr Mackay’s share could affect the size of the pool available to other senior personnel. Mr Lok argues that there must at least have been an agreement that Mr Mackay would have a minimum 20% LTIP entitlement. However, I am unable to conclude on the evidence that there was a concluded agreement on a minimum of 20%.

51.  Mr Mackay’s claim for unpaid LTIP entitlement fails.

52.  I add three footnotes.

53.  First, in considering Mr Mackay’s LTIP entitlement, I should not be taken to have accepted that Chi-X AP has been properly sued for such entitlement. If the draft LTIP had been agreed, the counterparties to the resulting contract would have been CXH and JCF Ill Chi-X Holdings SARL. It seems to me that the latter two companies should have been the entities sued for failure to pay any entitlement.

54.  Second, Clause 10 (“Termination of Employment”) of the latest draft LTIP shown to Mr Mackay in September 2016 stipulates:

“10.2 If the termination of the Participant's employment shall have resulted from death, retirement at legal retirement age or Incapacitation of the Participant, then, in all such cases, the Participant shall be deemed a “Good Leaver”. In all other cases of termination of employment, the Participant shall be deemed an "Intermediate Leaver" save that if the employment of the Participant is terminated for Cause he shall be deemed to be a “Bad Leaver”. An Intermediate Leaver shall be either a “Terminated Intermediate Leaver” -- if the employment of the Participant is terminated by the Company otherwise than for Cause -- or a “Resigning Intermediate Leaver” if the Participant resigns from his employment (not involving constructive dismissal).

...

10.5 In addition to the foregoing, within the Post Termination Period, the Company shall also have the right to require that the Participant transfer his Participant's Shares not forfeited pursuant to the foregoing provisions to such person(s) as the Company directs at the Fair Value of such Award Shares and Bonus Shares (and Co Invest Shares in the case of Bad Leavers only) and in each case:

(a) the payment to be made by the Company to the Participant shall be referred to as an “Exit Payment”;

(b) the rights so exercised by the Company shall be referred to as the “Buy Back Rights”; and

(c) the Participant shall be required, upon termination of employment to forthwith execute all documents required by the Company to effect the foregoing forfeiture of unvested Award Shares (where applicable) and transfer of Participant's Shares, notwithstanding that the Exit Payment has not then been paid and, should the Participant fail to execute the same, then the Company shall be entitled to exercise its powers pursuant to Clause 6.4 to execute the same.

And, for the purposes of this Clause 10.5, the “Post Termination Period” shall be:

(i) Six (6) months after the relevant Participant’s termination of employment in the case of a Good Leaver and a Terminated Intermediate Leaver; and

(ii) Twelve (12) months after the relevant Participant’s termination of employment in all other cases.”

55.  Had I found that (1) shares had vested in Mr Mackay pursuant to the draft LTIP and (2) Chi-X AP was the proper party to sue for the value of such shares, I would have held (as Ms Lok has submitted) that, in all probability upon Mr Mackay’s termination, CHX would have exercised its right under Clause 10.5 to buy back Mr Mackay’ shares with an Exit Payment. The Fair Value of the shares for the purposes of the Exit Payment is likely to have been zero or even negative. Mr Lok argues that the Fair Value should be assessed by reference to the acquisition price for the Chi-X Assets by JCF. But this ignores the discovery, shortly after the acquisition of the Chi-X Assets by JCF, that the US$8.9 million held by CX Japan and CX Australia could not be transferred to Chi-X AP for use as working capital. On the assumption that Mr Mackay may be regarded as a Good Leaver and a Terminated Intermediate Leaver, the Exit Payment would reflect Chi-X AP’s financial circumstances within the six months after the termination of his employment. Given Chi-X AP’s financial predicament around then (see [36] above), a prospective buyer at the time would have had to inject substantial cash into Chi-X AP to turn it around. This circumstance indicates that the company’s Fair Value within the relevant Post Termination Period would have been zero or even negative.

56.  Mr Mackay pleads that there was an oral “common understanding” reached with Mr Yordan that Clause 10.5 would not be invoked against employees who resigned and not against employees whose employment was terminated by Chi-X AP. That allegation was introduced by way of the Amended Reply on 17 September 2024. The alleged “common understanding” is vague and lacking in particularity. I am unable to accept it.

57.  Third, for completeness, I record here the subsequent history of the LTIP scheme as implemented by Chi-X AP following Mr Mackay’s departure.

58.  The draft LTIP terms presented to Mr Mackay were amended, approved and adopted by CXH’s board on 30 March 2017. The LTIP terms were further amended, approved and adopted by CXH’s board on 17 August 2018. The latter revision clarified an uncertainty in respect of the valuation of the Exit Payment for various classes of leavers. Further, the entitlement of LTIP participants under the revised LTIP Terms was subject to their payment of the price set out in the Revised LTIP Terms to CXH.

59.  On 24 March 2021, JCF announced that it had agreed to sell Chi-X AP to CBOE. A share purchase agreement (SPA) was executed between JCF III as seller, CBOE Worldwide as buyer, and CBOE as buyer parent company on that day. Under the SPA, the non-voting ordinary LTIP shares were to be repurchased, redeemed or cancelled prior to sale closing, thereby terminating the LTIP. Concomitantly, JCF III issued share buyback letters to all participants of the revised LTIP. Participants were told that JCF III intended to enter into an agreement for the sale of all issued and outstanding CXH shares. The purchase price of the shares would comprise an upfront consideration and a deferred amount payable within 48 months after closing. The deferred amount was contingent on CXH’s performance as at agreed milestones. Participants were informed that, based on the revised LTIP terms and the estimated amount of the Initial Purchase Price, the existing LTIP shares would not be entitled to any of the upfront consideration. But if deferred consideration was earned as result of CXH achieving the milestones stipulated in the SPA, the LTIP participants might be entitled to a share in the deferred payments. CXH proposed to buy back all revised LTIP shares at a nominal value (that is, the price that a participant had paid for their revised LTIP shares). In return for agreement to CXH’s share buyback, the LTIP shareholders would be entitled to participate in the deferred consideration paid pursuant to the SPA.

60.  All 30 participants in the revised LTIP scheme agreed to the proposed share buyback.

61.  On 7 May 2021, CXH’s board resolved to transfer all revised LTIP shares to JCF III. On 17 May 2021, the instruments of transfer and bought and sold notes for the share buyback were executed. The documents were stamped by the IRD in Hong Kong on 3 June 2021. A table specifying the maximum amount of the deferred consideration that each LTIP participant would be entitled to was also prepared. On 1 July 2021, JCF III transferred all classes of shares (including the revised LTIP Shares) to CBOE Worldwide.

62.  Four employees left Chi-X AP before the closing of the 2021 Sale. Their shares were not re-acquired by CXH on their departure. This was because in CXH’s view the four employees had materially contributed to Chi-X AP and deserved any future upside. The four were thus permitted to hold on to their shares after they left Chi-X AP. Their LTIP shares were acquired ahead of closing along with the LTIP shares of existing employees.

III.  CONCLUSION

63.  By reason of the foregoing, Mr Mackay’s claims for (1) remuneration for work done in March 2016, (2) interest on late payments of salary, (3) the outstanding ORSO contribution for March 2016, and (4) reimbursement of Pinsent Mason fees and DotCod expenses succeed. Mr Mackay’s other claims, including for a bonus of US$500,000 and LTIP entitlement, are dismissed.

64.  I shall now hear counsel on interest, costs and any outstanding matters.

Mr Michael LOK and Ms Candice LAU instructed by Messrs Lewis Silkin for the Plaintiff

Ms Frances LOK SC leading Mr Tom NG instructed by Messrs Robertsons for the Defendant

HCA 776/2021

[2024] HKCFI 511

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 776 OF 2021

____________________

____________________

______________

D E C I S I O N

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1.  There are two questions before me. One is whether to allow the Statement of Claim to be re-amended. The other is whether I have jurisdiction to hear this action.

2.  On the latter question, it seems to me that I have jurisdiction.  The Labour Tribunal has exclusive jurisdiction over unliquidated or liquidated money claims arising out of an employment contract.  However, mixed claims for monetary and non-monetary relief fall outside the Labour Tribunal’s jurisdiction.  The High Court can adjudicate on such mixed claims. Here I am satisfied that Mr Mackay’s claims in the Amended Statement of Claim (ASOC) and his proposed Re-Amended Statement of Claim are genuinely mixed claims. I say “genuinely” because claims in which non-monetary relief is sought merely as “window dressing” in an attempt to take the matter out of the Labour Tribunal’s jurisdiction will be treated as claims within the Labour Tribunal’s purview.

3.  On the proposed re-amendments to the ASOC, the background has been set out in paragraphs 3 to 9 of Deputy Judge Roxanne Ismail SC’s judgment in Anthony Mackay v Chi-X Asia Pacific Holdings Ltd[2023] HKCFI 938 (the Judgment).  I will not repeat that background here. 

4.  Essentially, JC Flowers & Co (JCF), a private equity firm based in New York obtained assets (the Chi-X Assets) from Nomura. To implement the acquisition, JCF incorporated Chi-X Holdings Limited (CXH) and the Defendant (Chi-X AP) (a subsidiary of CXH) to operate as the special purpose vehicles (SPVs) holding the Chi-X Assets. Mr Mackay claims to have entered into an Oral Agreement with Chi-X AP, whereby he would be employed as Chief Executive Officer (CEO) at an annual salary of US$500,000 and be entitled to participate in a Long-Term Investment Plan (LTIP) Agreement. In the Judgment, Deputy Judge Ismail refused summary judgment in respect of certain remuneration and benefits claimed by Mr Mackay as part of his employment with Chi-X AP.

5.  Mr Tom Ng for Chi-X AP opposes the proposed re-amendments on four broad grounds.  He says:

(1)  The amendments are late and inconsistent with ASOC which was verified by a Statement of Truth. No explanation has been given for the divergence.

(2)  The proposed amendments are embarrassing, such that Mr Mackay cannot cure what is said to be a demurrable claim by way of amendment.

(3)  The proposed amendments are prejudicial to Chi-X AP.

(4)  The limitation period of six years has now expired.  Consequently, by reason of RHC Order 20 Rule 5(5), I have no jurisdiction, or in any event should not exercise my discretion, to allow the proposed amendments.

6.  I am unable to agree with the broad grounds of objection advanced.

7.  Mr Ng submits that there was no averment in ASOC that Chi-X AP was a party to the Oral Agreement.  ASOC merely pleaded: “Pursuant to a series of discussions between Mr Yordan, Mr Porte, and the Plaintiff in or around 28 February 2016 (the ‘Oral Agreement’), it was agreed that the Plaintiff would be employed as CEO on the following terms …” ASOC referred to an LTIP Agreement.  But, according to Mr Ng, ASOC simply complained of the breach of the Oral Agreement and did not plead a separate breach of the LTIP Agreement.  The re-amendments therefore seek (Mr Ng says, belatedly) to introduce new causes of action: an Oral Agreement with Chi-X AP and separate breaches of the LTIP Agreement.

8.  More specifically, Mr Ng complains that by the re-amendments it is proposed:

(1)  to amend ASOC paragraph 22(c) to plead that it was a term of the Oral Agreement that Mr Mackay would be entitled to a minimum of 20% of the LTIP pool,

(2)  to amend ASOC paragraph 22(d) to plead that Mr Mackay would be entitled under the Oral Agreement to a bonus of US$500,000 in his first year of employment and an annual bonus of up to US$500,000 at the board’s discretion thereafter, instead of (as formerly pleaded) that Mr Mackay would be entitled to a bonus of US$500,000 per annum at the board’s discretion,

(3)  to introduce by a new paragraph 23A, an implied contractual entitlement under the Oral Agreement to a further bonus,

(4)  to introduce by a new paragraph 26A, an alleged Oral Agreement among Mr Porte, Mr Yordan and Mr Mackay that the latter would be entitled to 20% of the shares allocated to the LTIP,

(5)  to introduce by a new paragraph 27, an agreement on LTIP Terms among the parties’ legal representatives,

(6)  to introduce by a new paragraph 28A, the incorporation of the implied contractual entitlement to a further bonus into Mr Mackay’s employment contract,

(7)  to introduce by new paragraphs 29 and 29A, an oral agreement with Mr Yordan acting on behalf of Chi-X AP that Mr Mackay would be entitled to his salary for March 2016 despite an amendment to the commencement date of his employment contract,

(8)  to introduce by a new paragraph 29B(a), the incorporation of the implied contractual entitlement to a further bonus into Mr Mackay’s amended employment contract,

(9)  to introduce by a new paragraph 29B(b), an oral agreement with Mr Yordan acting on behalf of Chi-X AP that Mr Mackay’s LTIP commencement would be March 2016 despite Mr Mackay’s amended employment contract,

(10)  to introduce by a new paragraph 29B(c), an acknowledgment by Mr Yordan that Mr Mackay had already earned 25% of his LTIP entitlement under the LTIP Terms,

(11)  to introduce by a new paragraph 29B(d), an allegation that it had been determined that Mr Mackay would be entitled to 1,656,649 LTIP shares,

(12)  to introduce by new paragraphs 30 and 30A, a confirmation by Mr Yordan of Mr Mackay’s entitlement to 1,656,649 LTIP shares,

(13)  to introduce by a new paragraph 39A and revisions to paragraphs 40 and 42, the breaches of the implied entitlement to a further bonus and various understandings relating to the LTIP,

(14)  to introduce by revisions to paragraphs 43 to 48, that Mr Mackay’s 54.17% LTIP shares would be realised in accordance with the “Silver Lake Experience”.

9.  It will be seen that complaints (1), (2), (3) and (4) hinge on Mr Mackay’s alleged Oral Agreement.  The question for me is whether the cause of action based on the Oral Agreement was already sufficiently pleaded in the ASOC.  Complaints (6), (7), (8) and (9) relate to Mr Mackay’s employment contract (including in its amended form) and the LTIP.  Breaches of the employment contract in its original and amended forms featured in the ASOC.  Mr Ng is essentially complaining that understandings are said to have been reached with Mr Yordan acting for Chi-X AP in respect thereof.  This (he said) is a new allegation. However, on this, I do not see why Mr Mackay should not be allowed to particularise his allegations in the ASOC by identifying with whom purportedly on Chi-X AP’s behalf certain understandings were reached as to implementation of his employment contract (in its original and amended forms).  Complaints (5), (10), (11), (12), (13) and (14) plead facts as to Mr Mackay’s alleged entitlement under the master scheme of the LTIP and the realisation thereof. Mr Ng’s criticism is essentially that no cause of action was pleaded in respect of the LTIP in the ASOC.  If Mr Ng’s criticism is unwarranted, I do not see why I should disallow the re-amendments relating to the LTIP of which complaints are now being made by Mr Ng.

10.  In my view, fairly read, ASOC sufficiently pleaded a cause of action based on an Oral Agreement between Mr Mackay on the one part and Chi-X AP on the other.  ASOC paragraph 18 refers to “Neither Mr Porte nor any other director or representative of the Defendant” asking for documentary evidence.  Read in context, Mr Mackay must be taken to be suggesting there that at all material times, Mr Porte had actual authority to act as Chi-X AP’s director and representative.  When therefore Mr Mackay stated at ASOC paragraph 22 that “Pursuant to a series of discussions between Mr Yordan and Mr Porte and the Plaintiff in or around 26 February 2016 it was agreed that the Plaintiff would be employed as CEO on the following terms”, Mr Mackay must be taken to averring that, in arriving at the Oral Agreement, Mr Porte at least was acting for Chi-X AP in his capacity as director of Chi-X AP. What the proposed re-amendment to ASOC paragraph 22 now makes clear is that Mr Yordan is alleged to have been acting for Chi-X AP as well when the Oral Agreement was concluded.

11.  I accept that ASOC is messy.  Mr Mackay could have been clearer in his pleading.  But a lack of clarity which can be remedied by the provision of further and better particulars (as the proposed re-amendments in practical terms now seek to do) would not render a pleading demurrable.

12.  It is correct that Deputy Judge Ismail stated in the Judgment:

“23. Mr Ng on behalf of D submits that paragraph 22 of the ASOC pleads that P, Mr Yordan and Mr Porte entered into the alleged Oral Agreement and does not plead that the alleged Oral Agreement was made with D.

24. Ms Lau for P submits that it is implicit from the context that the plea is that Mr Yordan and Mr Porte were acting on behalf of D.

25. However, I agree with Mr Ng that the plea is deficient to plead D is a party to the Oral Agreement.

26. This deficiency is by itself sufficient to show cause against P’s application under 0.14 with respect to the alleged Oral Agreement. This is irrespective of whether P’s evidence in support of this Summons asserts the Oral Agreement to be with D ...

27. In any event, in its evidence, D denies the existence of the Oral Agreement with D, with particular reference to the LTIP issue ... A disputed oral agreement is unlikely to be suitable for summary determination, save where there is strong corroborating evidence. In light of the existence of the Employment Contract and the Amended Employment Contract, and D’s evidence, I regard the existence of, and the terms of, the alleged Oral Agreement to be a triable issue.”

13.  However, the “deficiency” that she identified seems to have been prompted by the lack of clarity in ASOC paragraph 22 read in isolation.  In summary judgment proceedings, there is a requirement under RHC Order 14 Rule 2(1) that a plaintiff swear “an affidavit verifying the facts on which the claim ... to which the application relates is based and stating that in the deponent’s belief there is no defence to that claim ...” Where a cause of action pleaded in a Statement of Claim lacks clarity, such deficiency makes it impossible for a plaintiff to swear that there is no defence to a claim.  The claim would be so confused that it would be difficult to depose in good faith that there was no defence to it.  The deficiency cannot be cured (as pointed out in paragraph 26 of the Judgment) by a plaintiff swearing further and better particulars in an affidavit in support.

14.  Deputy Judge Ismail seems to have felt that ASOC paragraph 22 was insufficiently precise as a pleading to enable summary judgment to be given in respect of the Oral Argument alleged. Whether Deputy Judge Ismail was right or wrong in her perception of ASOC paragraph 22, she observed that in any event Chi-X AP having denied the existence of the Oral Agreement, summary judgment could not be given in respect of the claims being advanced pursuant to the Oral Agreement.

15.  Thus, allowing Mr Mackay’s re-amendment application will not lead to the introduction of a new cause of action based on an Oral Agreement between Mr Mackay and Chi-X AP.  The Judgment is not an impediment to my so concluding.

16.  In the ASOC, Mr Mackay pleaded that, by the Oral Agreement, he became entitled to participate in the LTIP scheme.  He stated that the LTIP Agreement (which I understand from ASOC to be the Master Terms of the LTIP scheme) were finalised by relevant solicitor firms in September 2016.  He pleaded to his employment contract being amended on 1 September 2016 to comply with the Hong Kong Inland Revenue Department’s regulations.  Although the commencement date was changed in the amended contract, he pleaded to an understanding with Chi-X AP that the commencement date would be treated as 1 March 2016.  He complained of a failure to pay his bonus pursuant to the Oral Agreement and his employment contract.  He complained of a failure to allot shares in CXH to him under what he calls “the unsigned LTIP Agreement”.  He pleaded that pursuant to the terms of the LTIP Agreement, 50% of the non-voting ordinary shares in CXH ought to have been awarded to him.  Among other matters, he sought payment of a bonus of US$500,000, a declaration that he was beneficially entitled to CXH shares, and an order for specific performance of the Oral Agreement, and an allotment of CXH shares.

17.  In those circumstances, I am unable to say that the proposed re-amendments in respect of Mr Mackay’s alleged entitlement under the LTIP are introducing a fresh cause of action. What was previously pleaded is obviously now being fleshed out.  But I do not think that a new cause of action is being introduced based on the LTIP.  However messy the ASOC may have been, it is apparent that Mr Mackay was there claiming an entitlement to LTIP shares and other benefits pursuant to the terms of the master scheme under the LTIP Agreement.

18.  Accordingly, the proposed re-amendments relating to the LTIP Agreement do not constitute new matters.

19.  On prejudice, it is correct that the proposed re-amendments introduce more detail.  The defence against the re-amended claim will obviously entail more work on the part of Chi-X AP and its legal representatives.  But that is not a basis for refusing re-amendments. At the end of the day, if Mr Mackay’s more luxuriant claims fail, then Chi-X AP can recover the costs of defending itself.  Something more is needed to constitute prejudice.   I also note that the mere fact (relied on by Mr Ng) that Chi-X AP has an internal policy of retaining documents for only six years does not constitute sufficient prejudice to bar the proposed re-amendments.

20.  On limitation, given the conclusion that Mr Mackay’s claims in respect of the Oral Agreement and LTIP are not new, I do not believe that the matters sought to be introduced by the re-amendments constitute new causes of action which are time-barred.  In substance, the claims relating to the Oral Agreement and LTIP already featured in the ASOC.  Mr Ng’s limitation point falls away and there is no bar to my allowing the proposed re-amendments.

21.  I shall now hear the parties on costs and consequential matters.

HCA 776/2021

[2023] HKCFI 938

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 776 OF 2021

________________________

________________

_________________

D E C I S I O N

_________________

1.  This is the summons of Anthony Mackay, the Plaintiff, (“P”) dated 23 August 2022 (“the Summons”) seeking summary judgment against P’s former employer Chi-X Asia Pacific Holdings Limited (“D”) for, inter alia, various outstanding payments and/or benefits due to P upon termination of his employment.

2.  The following evidence was filed in respect of the Summons:

(1)  Affidavit of P dated 28 July 2022 (“Mackay 1”)

(2)  In opposition: Affirmation of Thierry George Porte (“Porte”) dated 24 November 2022 (“Porte 1”); Affirmation of Arvidas Remeza (“Remeza”) dated 1 December 2022; (“Remeza 1”) and Affirmation of Peter Donnelly Yordan (“Yordan”) dated 1 December 2022 (“Yordan 1”).

(3)  In reply: Second Affidavit of Anthony Mackay dated 16 February 2023 (“Mackay 2”)

THE MATERIAL FACTS

3.  In 2015-2016, P assisted JC Flowers & Co (“JCF”), a private equity firm based in New York to acquire certain assets (“the Chi-X Assets”) from Nomura (“Acquisition”). For the purpose of the Acquisition, JCF incorporated Chi-X Holdings Limited (“CXH”) and D, its subsidiary, in Hong Kong, as the special purpose vehicles holding the Chi-X Assets which included Chi-X HK.

4.  The Acquisition completed on 29 February 2016. P, Yordan and Porte were appointed directors of Chi-X HK on the same day.

5.  P claims that pursuant to an oral agreement on or around 28 February 2016 (“the Oral Agreement”), he became CEO of D on 1 March 2016.

6.  On 29 May 2016, P, Yordan and Porte were appointed as directors of D and CXH.

7.  By a written agreement dated 11 July 2016, P and D entered an employment contract stating that P’s employment as CEO commenced on 1 March 2016 (“the Employment Contract”).

8.  Upon realising that D had not reported P’s employment to the Inland Revenue Department (“IRD”) within the statutory limit, P and D agreed that they should execute another employment contract on exactly the same terms as the Employment Contract save that it state that P’s employment commenced on 1 April 2016. Such an agreement was executed on 1 September 2016 (“the Amended Employment Contract”).

9.  On 11 November 2016, D gave P six months’ notice of termination of his employment. At that time, D had made no payment to P in respect of salary or otherwise.

10.  P’s last day of employment was 10 May 2017.

11.  D made various payments to P in respect of his employment between 2 December 2016 and 21 September 2017.

12.  On 20 May 2021, P issued the Writ making claims for further entitlements under the Oral Agreement, the Employment Contract and/or Amended Employment Contract.

13.  On 6 September 2021, D filed its Defence.

14.  The Amended Writ and Amended Statement of Claim (“ASOC”) were filed on 6 January 2022. The Amended Defence (“AD”) was filed on 4 February 2022.

15.  On 23 August 2022, P issued this Summons.

THE LEGAL PRINCIPLES

16.  The legal principles on summary judgment are well-settled.

(1)  A plaintiff may obtain expeditious summary judgment to avoid unnecessary delay where there is no valid defence. Where a plaintiff’s application is properly constituted, he is prima facie entitled to judgment unless the defendant shows cause to the contrary. A defendant may show cause to the contrary (1) by preliminary objection e.g. the case is not within O.14, or the statement of claim or affidavit in support is deficient; or (2) on the merits e.g. he has a good defence, or (subject to O.14A) that a difficult point of law is involved, or there is a factual issue which ought to be tried, or there is a real dispute as to the amount involved which requires the taking of an account. HKCP 2023, vol.1, §14/4/1.

(2)  The defendant resisting a summary judgment application must condescend to particulars, and state clearly and precisely the facts in support of the defence: HKCP 2023, vol.1, §14/4/4. Mere assertions do not suffice, but must be supported by evidence that is credible so that one can say there is a fair or reasonable probability of the defence being a real or bona fide one: HKCP 2023, vol.1, §§14/4/9, 14/4/9A.

(3)  In considering whether there are triable issues, the court will not take the alleged defence at face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The court will also consider the inherent probability of the defence. But what the court should not do is to conduct a mini-trial on complicated factual issues: HKCP 2023, vol.1, §14/4/9A.

(4)  Asserting the need to investigate alleged obscurities or a belief that something will turn up upon investigation would not be proper discharge of the defendant’s burden: HKCP 2023, vol.1, §14/4/3.

THE ISSUES

17.  P’s claims can be categorised as follows:

(1)  The claims which depend upon a finding that the commencement of P’s employment with D was 1 March 2016 rather than 1 April 2016 including: unpaid salary; interest thereon; unpaid ORSO payments;

(2)  Unlawful deduction of bank charges from salary and interest thereon;

(3)  Unlawful withholding of salary and interest thereon;

(4)  Unpaid MPF contributions;

(5)  Payment in lieu of accrued annual leave;

(6)  Unpaid bonus;

(7)  Unpaid expenses;

(8)  Long-term incentive plan (“LTIP”) entitlement.

18.  I note before discussing the individual claims that P’s claims in the ASOC are made pursuant to the alleged Oral Agreement, the Employment Contract and the Amended Employment Contract.

19.  I will first deal with the issue of the true commencement date of P’s employment.

20.  It is undisputed that, in fact, P was working for D from 1 March 2016.

(I)  THE ALLEGED ORAL AGREEMENT

21.  P pleads at paragraph 22 of the ASOC that:

“…Pursuant to a series of discussions between Mr Yordan, Mr Porte and the Plaintiff in or around 28 February 2016 (the "Oral Agreement"), it was agreed that the Plaintiff would be employed as CEO on the following terms:

(a) The Plaintiff would be employed by the Defendant, and the employment would be governed by the laws of Hong Kong;

(b) The Plaintiff would receive a salary of US$500,000 per annum, paid in twelve equal monthly instalments in arrears in the first week of each month;

(c) The Plaintiff would be invited to participate in the L TIP and would be awarded a minimum of 20% of the pool which would be made available to fund the LTIP;

(d) The Plaintiff would be eligible to receive an annual cash bonus of up to US$500,000 per annum, paid, at the discretion of the board with consideration to the established payout ratios of the Defendant's subsidiaries, after the financial year end;

(e) The Defendant would pay US$50,000 per annum in 12 equal monthly contributions to the Plaintiff's ORSO Scheme;

(f) The Plaintiff would receive medical insurance coverage by virtue of the Defendant taking over and assuming responsibility for the Plaintiff's existing medical insurance plan;

(g) There would be six months' notice on either side with some non-compete and other restrictions on the Plaintiff included in the L TIP;

(h) The Plaintiff would receive 30 working days' paid annual leave;

(i) The Plaintiff could perform his duties, working from any of the residences which he maintained around the world; and

(j) The Defendant would reimburse the Plaintiff for any expenses incurred by the Plaintiff for and on behalf of the Defendant;…”

22.  Paragraph 22 of the ASOC is not admitted by the AD paragraph 21, which further asserts that in any event, paragraph 22 cannot give rise to any legal obligation or contract binding on D.

23.  Mr Ng on behalf of D submits that paragraph 22 of the ASOC pleads that P, Mr Yordan and Mr Porte entered into the alleged Oral Agreement and does not plead that the alleged Oral Agreement was made with D.

24.  Ms Lau for P submits that it is implicit from the context that the plea is that Mr Yordan and Mr Porte were acting on behalf of D.

25.  However, I agree with Mr Ng that the plea is deficient to plead D is a party to the Oral Agreement.

26.  This deficiency is by itself sufficient to show cause against P’s application under O.14 with respect to the alleged Oral Agreement. This is irrespective of whether P’s evidence in support of this Summons asserts the Oral Agreement to be with D (see Li Chuen Kwai v Po Lam Construction Development Ltd (unrep.), HCA 2376/2013, 24 September 2014, at para. 19).

27.  In any event, in its evidence, D denies the existence of the Oral Agreement with D, with particular reference to the LTIP issue: Porte paras. 13-25. A disputed oral agreement is unlikely to be suitable for summary determination, save where there is strong corroborating evidence. In light of the existence of the Employment Contract and the Amended Employment Contract, and D’s evidence, I regard the existence of, and the terms of, the alleged Oral Agreement to be a triable issue.

28.  Accordingly, the claims summarised at paragraph 17(1) above are not suitable for summary determination.

(II)  THE WRITTEN EMPLOYMENT CONTRACTS

29.  It is undisputed that P and D signed the Employment Contract then subsequently both signed the Amended Employment Contract at Robertsons’ office. It is common ground that the amendment of the commencement date was to avoid falling foul of D’s statutory obligations to the IRD.

30.  D’s case on evidence is that P and D agreed that D would employ P as a consultant for March 2016, and that D had paid P a consultancy fee in respect of March 2016 (Remeza 1 para. 9(k)(i); Yordan 1 para.53). The assertion of having paid a consultancy fee for March 2016 has not been corroborated. However, on 14 June 2017, D asked P for an invoice in respect of a March 2016 consultancy fee. That is credible evidence of an agreement to treat March 2016 as a period of consultancy.

31.  P’s case (that the agreed commencement date of employment was 1 March 2016 not 1 April 2016) would require me to find that the Amended Employment Contract was a sham and there was an intention to deceive the IRD. P has not pleaded that the Amended Employment Contract is a sham. Indeed, P’s counsel has expressly disavowed claiming it to be a sham, and P relies on the Amended Employment Contract to found some of its claims in the ASOC.

32.  In the circumstances, I am not willing to implicitly find the Amended Employment Contract is a sham. Accordingly, I will not, for present purposes, award summary judgment in respect of any claims founded on the premise that the commencement of P’s employment with D was 1 March 2016.

33.  Whilst I am not satisfied that D paid a consultancy fee in respect of March 2016, I accept that P has not made a claim for the same in the ASOC.

34.  For present purposes, I am unable to accept that P has established that the Employment Contract subsists as a valid contract in the light of the later valid Amended Employment Contract (which duplicated the Employment Contract save for the change in commencement date).

35.  Accordingly, for summary judgment purposes, P has only established an entitlement to make claims under the Amended Employment Contract.

(II)  THE CLAIMS

36.  The Amended Employment Contract provides so far as is material:

“3. Place of Work

The Executive shall perform his duties at such locations within or outside Hong Kong as he shall from time to time determine, including from the Executive's current place of residence in Monaco.

…

6. Remuneration

6.1 The Executive will be paid a basic salary at the rate of US$500,000 per annum (which shall be inclusive of any directors' fees payable to him as a director of any Associated Company). The salary shall be payable in twelve equal monthly instalments in arrears on the last working day of each month to the Executive's nominated bank account.

6.2 The Executive's salary may be reviewed by the Company on an annual basis. Any increase in salary is in the sole discretion of the Company.

6.3 In addition to the salary specified in clause 6.1, the Executive shall be entitled to payment of a bonus based on his performance and the profitability of the Company and the Group for each financial year ended 31^st March. The payment of any such bonus and the amount thereof will be determined by the Board in its absolute discretion. Any bonus awarded shall be paid in full, without deduction or set off and shall not be made conditional upon the Executive continuing to be employed on the date of payment of the bonus or no notice of termination of employment having been given. Bonus will be paid in full no later than 31^st May in each year.

…

9. Annual Leave

9.1 In addition to the general public holidays (excluding Sundays), the Executive shall be entitled to 30 working days' paid annual leave (inclusive of statutory annual leave) for each calendar year, which will be the leave year.

9.2 Annual leave is to be taken at times mutually agreed in advance with the Board.

9.3 Annual leave may not be carried forward from one leave year to the next for a period of more than 90 days unless agreed in writing by the Board. No payment in lieu will be paid for annual leave not taken.

…

11. Expenses

The Company shall reimburse the Executive all reasonable telephone, travel, hotel, entertainment and other expenses incurred by the Executive in or about the performance of his duties under this Agreement provided that the Executive provides reasonable documentary evidence of the expenditure that he has incurred in support of any claim for reimbursement of expenses in accordance with the Company's policies from time to time.”

(1)  Unlawful deduction of bank charges from salary, and interest thereon

37.  There is an unedifying dispute as to whether or not D unlawfully deducted US$54 from D’s salary payments for March to November 2016 and December 2016.

38.  It is clear from the bank remittance slips that D remitted to P the salary amounts less bank charges, rather than the full salary amounts.

39.  D’s final argument (which shifted) is that D should not be responsible for bank charges it incurred by remitting salary payments to P’s bank account in Monaco.

40.  However, it is clear from Clause 6.1 of the Amended Employment Contract that D’s obligation was to pay P’s salary to P’s nominated bank account.

41.  Accordingly, P is entitled to payment of the US$54, plus interest thereon which was submitted by P’s counsel to be US$20.62 (without dispute).

(2)  Wrongful retention of salary for March, April, May 2017

42.  The claim in respect of March 2017 salary falls away with my decision that I cannot on a summary basis find the commencement date of employment to be 1 March 2016. I will now address the April and May 2017 salary.

43.  On 12 April 2017, D filed Form IR56G with the IRD in anticipation of P’s last day of employment, i.e. 10 May 2017.

44.  S.52(7) of the Inland Revenue Ordinance (Cap.112) prohibits an employer who has given such notice from making any payment to the employee for a period of one month from the date on which the notice was filed with IRD, without consent in writing from the IRD.

45.  The prohibition on payment of money to P thus fell away on 12 May 2017. D claimed that the IRD had requested it to continue to withhold payment, however it has produced no evidence of such a request, and P’s solicitors’ inquiries of the IRD elicited a response that no such request was made.

46.  Pursuant to Clause 6.1 of the Amended Employment Contract, monthly salary was payable on the last working day of the month.

47.  S.25 of the Employment Ordinance (Cap 57) (“the EO”) requires any sum due to a terminated employee to be paid within 7 days of termination.

48.  Accordingly, I agree with P that:

(1)  The April 2017 salary became due on 12 May 2017 (in light of the IRD notice);

(2)  The May 2017 salary became due on 17 May 2017 (in light of s.25(1) of the EO).

49.  D paid the April and May 2017 salary on 21 June 2017.

50.  P is entitled to:

(1)  interest on the April 2017 salary from 12 May 2017 to 21 June 2017: US$493.15; and

(2)  interest on the May 2017 salary from 17 May 2017 to 21 June 2017: US$103.11.

(3)  Unpaid MPF contributions

51.  By paragraph 37 of the ASOC, P claims that D failed to enrol P into a MPF scheme pursuant to ss.7-7A of the Mandatory Provident Funds Schemes Ordinance (Cap. 485) (“the MPFSO”), and that HK$21,000 ought to have been paid into a MPF scheme for the benefit of P.

52.  However, I am not persuaded that P has any private law cause of action against D for non-payment of MPF contributions. S.18 of the MPFSO provides that unpaid contributions are due to the Mandatory Provident Funds Schemes Authority (as held in Hsin Chong Construction Co Ltd (No.3) [2021] 1 HKLRD 582 at para. 4).

53.  Accordingly, P is unable to establish its claim for summary judgment of unpaid MPF contributions.

(4)  Payment in lieu of accrued annual leave

54.  By Paragraph 38 of the ASOC, P claims (under the Amended Employment Contract) payment in lieu of approximately 20 days of untaken annual leave, in the amount of approximately US$28,000 less an amount of approximately US$14,000 already paid.

55.  As set out above, Clause 9.3 of the Amended Employment Contract provides that “No payment in lieu will be paid for annual leave not taken”.

56.  P argued that Kwan Siu Wa Becky v Cathay Pacific Airways Ltd [2011] 5 HKLRD 1, §§49-53; affirmed by the CFA in Cathay Pacific Airways Ltd v Kwan Siu Wa Becky (2012) 15 HKCFAR 615, §§35-37 established that, for the purposes of deciding the rates of pay for payment in lieu of annual leave, if the contract did not distinguish between statutory leave and the excess period of leave granted by contract, then it was to be assumed that the rates of pay would be the same for both. I do not see how that assists me. I am not concerned with the appropriate rate of pay, but with the entitlement to pay in lieu in any event. As Mr Ng submits, the Cathay decision is founded on the proper construction of the employment contract, and does not suggest that a contractual provision should be disallowed by virtue of some other policy or rule.

57.  P did not demonstrate any reason why Clause 9.3 in respect of payment in lieu is not enforceable.

58.  In the circumstances, P is unable to establish its claim for summary judgment for payment in lieu of annual leave.

(5)  Unpaid bonus

59.  Clause 6.3 of the Amended Employment Contract provides that the Executive shall be entitled to payment of a bonus based on his performance and the profitability of the Company and the Group for each financial year ended 31^st March; and whether or not a bonus will be paid and in what amount will be determined by the Board in its absolute discretion.

60.  It is common ground that D decided not to pay P any bonus.

61.  D’s evidence asserts that D was unhappy with P’s performance. P responds that there is no contemporaneous documentation evidencing P’s failure to discharge his duties satisfactorily.

62.  It is common ground that, for P to succeed, I would have to find that D had exercised its discretion irrationally or perversely.

63.  Clearly, I am unable to make such a finding on a summary judgment application where the evidence of P and D conflicts as to P’s performance.

(6)  Expenses

64.  By paragraph 41 of the ASOC, P claims the reimbursement of expenses incurred on behalf of D, in particular HK$306,513.46 in respect of unpaid business expenses including the cost of flight tickets, hotel accommodation, food and beverages; and HK$126,437 and GBP432 in respect of unpaid professional expenses including solicitor and notary fees, paid by P because D did not yet have a bank account. The amount claimed by P takes account of a payment of US$127,578 made by D on 3 August 2017 in respect of unpaid business expenses.

65.  P’s claim at paragraph 41 of the ASOC is not admitted by paragraph 47 of the AD. Paragraph 51 of the AD avers that D’s solicitors informed P’s solicitors by letters dated 3 and 15 August 2017 that P had failed to provide reasonable documentary evidence of the expenditure to substantiate his claim; and that D agreed to pay P US$127,578 in full settlement of the expenses substantiated by him and P received the payment.

66.  Clause 11 of the Amended Employment Agreement provides that:

“[D] shall reimburse [P] all reasonable telephone, travel, hotel, entertainment and other expenses incurred by [P] in or about the performance of his duties under this Agreement provided that [P] provides reasonable documentary evidence of the expenditure that he has incurred in support of any claim for reimbursement of expenses in accordance with [D’s] policies from time to time.”

67.  P obtained clarification in Further and Better Particulars dated 1 November 2021 that “[D’s] policy in relation to [P’s] claim for reimbursement of expenses was set out in Clause 11 of the Employment Agreement or the Amended Employment Agreement. There is no separate company’s policy prevailing at the material time in relation to reimbursement of expenses”.

68.  By way of background to this claim, it is undisputed that in respect of expenses incurred by P on behalf of D prior to March 2016, P had submitted a spreadsheet itemizing the expenses with supporting credit statements (but without underlying receipts). D had raised one query which P had answered, then D promptly approved the expenses on the basis of such information.

69.  It appears (from a letter dated 15 May 2017 from P’s solicitors to D’s solicitors) that P first submitted his claim for reimbursement of a further round of expenses in November 2016, with spreadsheets listing the payments and supporting credit card statements. Under cover of a letter dated 20 April 2017, P’s solicitors provided D’s solicitors with approximately 2 bundles’ worth of credit card statements and underlying receipts. By the letter dated 15 May 2017, P’s solicitors referred to the earlier submission of documents and asserted that they had provided full details of expenses with supporting documents. By letter dated 19 May 2017, D’s solicitors responded to the effect that D would review the expenses claims and supporting documents. P’s solicitors chased the reimbursement claim by letter dated 25 May 2017, asserting that D had requested and been provided with much more documentary support than on the previous claim.

70.  By letter dated 3 August 2017, D’s solicitors stated that:

(1)  D had completed its review;

(2)  P had not provided sufficient justification/documentation for a number of expenses and that a number of documents/claims were duplicates.

(3)  D was prepared to pay for the flight, hotel, transport and miscellaneous expenses claimed;

(4)  As to meals D was of the view that US$200 per head was a reasonable amount to spend for client entertainment so only part of the claim for meals was approved.

71.  So far as I am aware, there was no response from D in respect of the unpaid professional expenses.

72.  Remeza 1 at paras. 103-112 makes various assertions in relation to expenses but none of them in my view demonstrate any good reason why P should not be reimbursed.

(1)  He states that the new management team appointed at D after P’s termination had queried why there was no proper expense policy – that is no answer to D’s liability under Clause 11.

(2)  He states D was entitled to impose an expense policy under Clause 11 – that is true, but where no policy is put in place and communicated to P prior to him incurring expenses on behalf of D, that is no defence.

(3)  He states the detail provided by P as to the expenses is a tacit acknowledgment that this is not a matter for summary judgment – that is absurd; there can be no legitimate complaint that P has excessively evidenced the expenses.

(4)  He states P made no attempt to claim the professional expenses for 4 years before issuing the Writ – that is no defence as P is within the limitation period to make the claim.

73.  Mr Ng attempted to persuade me that where D had investigated the claims in 2017 and paid in part, then the rest of the claims should be investigated at trial with Scott schedules. In my view, it is insufficient to assert a desire to investigate in order to found a triable issue.

74.  Mr Ng was able to point to two invoices which appeared to relate to expenses incurred before 1 April 2016, namely:

(1)  a Pinsent Mason invoice dated 13 April 2016 in respect of work done in February-March 2016, totaling HK$55,037;

(2)  a DotCod receipt dated 21 March 2016 in the amount of HK$996.

75.  Mr Ng was unable to point to any other expense as falling outside Clause 11 of the Amended Employment Contract.

76.  Ms Lau accepted that expenses incurred before Clause 11 became operative could not be claimed on this Summons.

77.  Accordingly, I award summary judgment in respect of the unpaid business and professional expenses less the two identified expenses incurred before 1 April 2016. P is entitled to summary judgment for:

(1)  Business expenses: HK$306,513.46 - $996 = HK$305,517.46;

(2)  Professional expenses: HK$(126,437-55,037) = HK$71,400, + GBP 432.

(7)  LTIP

78.  P claims entitlements in respect of an alleged long-term incentive plan (“LTIP”).

79.  P’s claim is apparently based on:

(1)  the alleged Oral Agreement (pleaded at paragraph 22 of the ASOC, as set out at paragraph 21 above); and

(2)  an alleged LTIP Agreement, pleaded at paragraph 23 of the ASOC:

“The LTIP was intended to be a scheme created for senior employees of the Defendant. The purpose of the scheme was to reward employees for their performance and contribution to the success of the company as measured by the return that JCF received from their investment in the Company. Selected employees would collectively receive up to 25% of the profits derived by JCF from either dividends flowing to CXH or the excess capital received by JCF from selling all of or parts of CXH and the subsidiaries. The final form of the terms of the LTIP agreement was circulated between Tanner de Witt, and Robertsons, on 23 June 2016 (the "LTIP Agreement") with a final, minor, modification agreed on 1 September 2016. “

80.  P pleads the relevant claim as follows in the ASOC:

“42. In breach of the Oral Agreement, the Defendant has failed to allot to the Plaintiff, any shares in CXH which would have vested in the Plaintiff pursuant to the Oral Agreement and the unsigned L TIP Agreement.

Particulars

a. Pursuant to the Oral Agreement, the Plaintiff was entitled to participate in the LTIP from 1 March 2016.

b. Pursuant to the terms of the LTIP Agreement, 50% of the non-voting ordinary shares in CXH awarded to the Plaintiff under the LTIP (defined as the Award Shares in the LTIP Agreement) have vested in the Plaintiff as of the Termination Date.

43. Despite numerous requests made by the Plaintiff and his solicitors, the Defendant has refused to allot shares to the Plaintiff in accordance with the terms of the Oral Agreement and the LTIP Agreement.”

81.  It seems to me that P’s pleaded claim with respect to the LTIP is pursuant to the alleged Oral Agreement only. There is no plea of breach of the alleged LTIP Agreement. As discussed at paragraphs 25-28 above, the existence and terms of the Oral Agreement, or claims thereunder, are not a matter for summary judgment.

82.  In any event, the evidence demonstrates a triable issue as to whether the alleged LTIP Agreement was actually agreed.

(1)  In their affirmations on behalf of D, Remeza and Yordan both state that P was given an unconditional offer relating to the LTIP at a meeting in September 2016 but P rejected the offer because P did not sign the LTIP Agreement and said “I need to check the numbers” (Remeza 1 §§120; Yordan 1 §§60-62).

(2)  P’s evidence in reply is that the context in which he said “I need to check the numbers” is that he, for the first time, saw that the agreed “20% LTIP” was reduced to a specific number of shares, i.e. 1,656,649 so he wanted some time to verify the exact calculation (Mackay 2 §§24-25).

(3)  On the basis of that evidence, and P’s concession that he said those words, it seems to me at least arguable that the LTIP Agreement was not finally agreed.

83.  Accordingly, I am unable to find that P has clearly established an entitlement to any benefits under the alleged LTIP Agreement.

(8)  DECLARATIONS

84.  P claims declarations (1) that D was in breach of ss. 23, 25, and 32 of the EO by virtue of its failure to make timely payment of salary; and (2) that D was in breach of ss7, 7A of the MPFSO for failure to enrol P in an MPF scheme.

85.  I will not make such declarations on the basis that:

(1)  I am not satisfied that D ought to have paid P salary for March 2016, and the deduction of bank charge deduction is de minimis,

(2)  I am not satisfied that P has locus standi to seek relief in respect of non-payment of MPF.

CONCLUSION

86.  Accordingly, summary judgment will be entered against D as follows: D do pay to P:

(1)  In respect of bank charges deducted from salary: US$54, + US$20.62 interest thereon;

(2)  In respect of interest payable on withheld salary for April and May 2017: US$493.15 + US$103.11;

(3)  In respect of unpaid business and professional expenses: HK$376,917.46 + GBP432.

87.  I do not consider the remainder of P’s claims to be suitable for summary determination. D has leave to defend the remainder of the claims.

88.  The parties are directed to liaise with a view to agreeing directions as to the further conduct of the action; and to report to court in writing within 14 days on such directions as are agreed and/or any further directions required by the court.

89.  Having regard to HKCP 2023, vol.1, §14/7/10, I make a costs order nisi that one third of the costs of and incidental to the Summons be paid by D to P in any event, and two-thirds of the costs of and incidental to the Summons be in the cause, to be taxed if not agreed. In the absence of any order to vary, the order will become absolute after 14 days.

Ms Candice LAU instructed by Messrs Lewis Silkin for the Plaintiff

Mr Tom NG instructed by Messrs Robertsons for the Defendant