A

A
B
B HCA 320/2011
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C IN THE HIGH COURT OF THE
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HONG KONG SPECIAL ADMINISTRATIVE REGION
D
COURT OF FIRST INSTANCE E
E ACTION NO 320 OF 2011
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____________
F
G
G
BETWEEN
H
GRANT DAVID VINCENT WILLIAMS Plaintiff
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I
I and
J
J JEFFERIES HONG KONG LIMITED Defendant
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____________
K
L
L Before: Deputy High Court Judge Seagroatt in Chambers
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Dates of Hearing: 11, 13-14, 17-19 June 2013
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Date of Delivery of Judgment on Liability: 20 June 2013 N
N Date of Delivery of Judgment on Damages: 8 July 2013
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O
__________________________
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JUDGMENT ON DAMAGES
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__________________________
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Q
1. The successful plaintiff’s claim for damages has two aspects, R
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the first of which is hardly controversial in view of my
S
S decision that he was wrongly, unfairly dismissed. I will deal
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with them under separate headings.
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U
U
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 -2- A
A
B
B CONTRACTUAL LOSS OF EARNINGS AND BENEFITS
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C
2. Had the defendant given proper notice, this would have been
D
D for six months under clause 13.1 by which either party had
E
to give such period of notice. It was due to change to three
E
months on 31 March 2012, a little over fifteen months in the F
F future so that does not affect the position.
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G
3. The six monthly loss is an agreed figure of H
H HK$1,017,434.81. I have left this unconverted into
I
I
Singaporean or United States dollars simply because it is
claimed in Hong Kong currency. J
J
K
K 4. Clause 3.3 provided for a grant of shares in the Jefferies
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Group of US$250,000.00 value subject to certain subclauses
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which relate to certain circumstances of disentitlement. M
M They do not apply in this case. The plaintiff is entitled to
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that sum.
N
O
O 5. Clause 4 sets out the entitlement to a Retention Bonus on or
P
P
before 31 December 2010. Again it provides for
circumstances in which the bonus would not be payable. Q
Q
Again they do not apply in these circumstances. In any
R
R event, it specifically provides for payment of this sum if the
defendant company were to terminate the employment other S
S
than for cause before 31 December 2010. (The plaintiff’s T
T employment was terminated on 8 December 2010.)
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U
V
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 -3- A
A
B
B 6. Finally under this aspect, there is by clause 5, a Guaranteed
C
Bonus for the fiscal year 2011 payable on 12 March 2012.
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That date for payment is now long past by some fifteen D
D
months. This is also in the sum of US$250,000.00. There
E
E are provisions for disentitlement to this bonus but if
employment was terminated other than for cause before F
F
31 March 2012, the bonus will still be “immediately paid”.
G
G There is therefore, no valid exclusion of the plaintiff from
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this guaranteed bonus.
H
I
I 7. The total sums due to the plaintiff to cover the sixmonth
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period from 8 December 2010 to 7/8 June 2011 are
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HK$1,017,434.81 and US$750,000.00. K
K
L
L DAMAGES FOR BREACH OF THE IMPLIED TERM OF TRUST AND
CONFIDENCE M
M
N
8. This implied term which applies to every contract of
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employment is not in any way or to any extent affected by O
O the particular terms of his contract of employment.
P
Adopting part of the speech of Lord Steyn in Malik (and
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another) v Bank of Credit and Commerce International Q
Q
S A [1998] A C 20:
R
R “The evolution of the implied term of trust and confidence is a
fact. It has not yet been endorsed by your Lordships’ House. It S
S has proved a workable principle in practice. It has not been the
subject of adverse criticism in any decided cases and it has T
been welcomed in academic writings. I regard the emergence
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of the implied obligation of mutual trust and confidence as a
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sound development.”
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 -4- A
A
B
B 9. Earlier in his speech, Lord Steyn expressed the term as
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“imposing an obligation that the employer shall not:
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D
“without reasonable and proper cause, conduct itself in a
D manner calculated and likely to destroy or seriously damage the
relationship of confidence and trust between employer and E
E employee.” (see Woods v W M Car Services (Peterborough)
Ltd [1981] CR 666, 670 (BrowneWilkinson, J) )” F
F
10. Lord Steyn furthermore adopted the statement of G
G
Mr Douglas Brodie of Edinburgh University in his article
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H “Recent cases, Commentary, The Heart of the Matter:
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Mutual Trust and Confidence” (1996) 25 1 L J 121:
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“In assessing whether there has been a breach, it seems clear J
J that what is significant is the impact of the employer’s
behaviour on the employee rather than what the employer K
K
intended. Moreover, the impact will be assessed objectively.”
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L 11. I now go on to consider objectively both what the defendant
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employer did and the effect it had upon the plaintiff
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employee. N
N
O
12. We start with the email issued by Mr Bob Albano on
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8 December, following the reaction at the centre of decision P
P
— “Damage control will be directed by New York”,
Q
Q indicating something of an emergency as viewed by Mr Bob
Albano, and others. His response had been triggered by a R
R
communication from Laurin Scoran: S
S “This is awful, vile and an extreme embarrassment for the firm.
Inge sent this out without checking to see it was approved. We T
T should never have permitted Grant Williams to write this
garbage in the first place.” U
U
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 -5- A
A
B
B 13. It is difficult to know what is meant by the written “garbage”
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unless it is a reference to the English subtitles to the Hitler
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video which Michael Alexander behaved to have been D
D
created by the plaintiff. That notion — bizarre as it was —
E
E was thus shared by others in New York as I surmised earlier.
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F
14. The email sent out by Ms Inge Ivechenko on the same date
G
G went to all clients and perhaps wider still. I have referred to
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it in the first part of my judgment. It bears repetition:
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“Please be aware that we inadvertently distributed Grant I
I Williams’ 7 December 2010 edition of ‘Things That Make You
Go, Hmmm. . .’ before it was properly vetted. That piece J
J
contained third party material from a website that we do not
condone. . .We sincerely apologise for the inadvertent
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distribution of this material.”
K
L
L 15. The blame was put squarely on the plaintiff’s shoulders. The
defendant was doing its utmost to distance itself from its M
M
employee. In effect it was denying it as a corporate N
N publication. It incorrectly stated that it
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“contained. . . material from a website that we do not
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condone”. It contained a reference to “material from a P
P website”. It had all the signs of an illconsidered, hasty and
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inaccurate attempt to shuffle off responsibility. It was
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extremely damaging to the plaintiff. R
R
S
S 16. Coupled with the cessation of the daily newsletter (which
would have been noticed by at least 900 people in the T
T
financial world) and the virtually immediately dismissal of
U
U the plaintiff for gross misconduct, the position would have
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V
 -6- A
A
B
B become readily apparent to a much wider audience. I have
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to bear in mind that some of that audience, if not the
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majority of it with a degree of intelligence above the D
D
average, would have wondered why on earth the newsletter
E
E had occasioned such an extreme reaction. They may have
understandably queried, in their own minds at least, whether F
F
there was something else behind the decision which did not
G
G reflect well upon the plaintiff and was perhaps the real cause
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for his peremptory dismissal. We have also not been able to
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see any record of other communications between the senior I
I personnel in New York which reflected their discussions and
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thinking.
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K
K 17. What we do have, as aggravating factors, are the perceptions
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L
that the reference to the Hitler video somehow denoted
racism, antiSemitism, and, the product of an inaccurate but M
M
nonetheless oversensitive line of thought, sexism. These
N
N perceptions aggravated the errors of the decisionmaking
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body, however wide that may have been, but more
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importantly for the plaintiff, they had the potential to P
P aggravate the reaction against him. It is not known how
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many shared Mr Alexander’s deluded belief that the plaintiff
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in fact, created the offending subtitles. If that belief R
R permeated the thoughts and expressions of others, then the
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S
barriers being raised for the plaintiff were becoming
considerable. Mr Alexander’s own statement says that “his T
T
[plaintiff’s] name came up a few times in client meetings in
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U the first few months following his dismissal, and I addressed
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 -7- A
A
B
B [them] by saying that ‘the newsletter was entirely
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inappropriate and we had to dismiss him because of this
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unacceptable conduct’.” Whether by then Mr Alexander had D
D
disabused himself of his fundamental misunderstanding of
E
E the origin of the English subtitles is not known but he may
well have passed his original error onto clients — and F
F
thereby most probably a wider audience.
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G
H
18. The plaintiff’s evidence concerning the problems he had
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experienced in obtaining employment, or even access to the I
I means of obtaining opportunities to explore was entirely
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reasonable and I accept it. I do not need to repeat it. I think
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too his evidence about what Michael Alexander said to him K
K after the short dismissal encounter, to the effect that he
L
L
expressed some degree of regret or sympathy in view of
what had happened, has the ring of truth about it. Michael M
M
Alexander had brought the plaintiff and others with him to
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N Jefferies from another financial concern in 2010. Whether
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Mr Alexander ever communicated to his superiors his own
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misunderstanding, when he realised it, is something we shall P
P not know.
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Q
19. “Head hunters” are no doubt a special breed but if one finds R
R it difficult or impossible to place a client who has been
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S
dismissed allegedly for gross misconduct by a wellknown
large group in the financial world which would require T
T
detailed explanation (if a candidate was able to proceed as
U
U far as an interview for a vacancy) then others would find a
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 -8- A
A
B
B similar difficulty. I readily accept that instructing more than
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one such agency in this crossfertilising world, would be
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counterproductive. Advice to the effect that it would be D
D
better to wait for “it all to blow over” or “go away”, though
E
E unpalatable and certainly not reassuring, would be almost
inevitable and leave the plaintiff in limbo. F
F
G
G 20. Evidence was given concerning the special treatment
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accorded to another employee of the defendant who had
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appeared in court in Hong Kong for an offence of violence, I
I when in drink, against a police officer. He received support
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from the defendant company and not only retained his
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liberty but also his employment. The defendant’s terms of K
K employment categorised such behaviour as justifying instant
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L
dismissal. The contrast between his treatment by his
employers and their treatment of this plaintiff would have M
M
left anyone in the financial trading milieu with the entirely
N
N unwarranted impression that Grant Williams’ behaviour must
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have been particularly heinous.
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P
P 21. I accept the plaintiff’s evidence concerning how he viewed
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the stigma. I consider it a matter of reality. A vindication of
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his position and a declaration that he should be free of that R
R stigma, and the other taints or smears, is the essential basis
S
S
for a return to normality and he now has that. In view of his
ability as recognised by the defendants when they took him T
T
on fortified even by their recognition of the newsletter as an
U
U attractive marketing tool, it is virtually unarguable that his
V
V
 -9- A
A
B
B inability to gain worthwhile employment commensurate with
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his ability is not entirely due to the treatment he received at
C
the hands of the defendant company and the Group. D
D
E
E 22. He has obtained limited employment with a significantly
reduced income, which the plaintiff believes will be or can F
F
be equally remunerative once the stigma, etc, are removed.
G
G Mr Ashley Burns SC on behalf of the plaintiff argues that it
H
would be reasonable to take the loss under this head as
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terminating at the 31 July 2013. I think he is right. That I
I represents a period of a little over two years since the
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termination of the sixmonth period of notice which forms the
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basis of the first period of loss. Credit will of course have to K
K be given for any earnings between 8 June 2011 and 31 July
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L
2013, which is conceded.
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M
BONUSES AND THE CULTURE N
N

23. It has been argued that by reason of the troubles experienced O

O
in the financial world, remuneration and bonuses are, to use P
P a colloquial phrase, not what they were.
Q
Q
24. The meaning of bonus seems to have changed significantly R
R over the past decade or so. Entitlement to bonuses in one
S
form or another has been built into contracts as a matter of
S
course. They have ceased, it appears, to be dependent upon T
T
performance over and above that for which high levels of
U
U remuneration, in themselves generous, are paid. There may
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V
 - 10 - A
A
B
B be some tax advantage to employer or employee, in devising
C
pay packages along these lines, I do not know, but the public
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at large has come to recognise that bonuses are not D
D
synonymous with success but are paid regardless of success
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E or failure.
F
F
25. No evidence has been called before me to suggest that any of
G
G the bonuses (however described) to which the plaintiff was
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entitled under his contract of employment are no longer
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payable or, rather, were not payable in 2011 to 2013. Nor is I
I there any to suggest that the level of principal remuneration
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has been reduced, or that the pay structure of anyone of the
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status or position of the plaintiff in 2010, has been varied or K
K reduced in any way. No comparables have been put forward.
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L
I am not prepared to be influenced by some vague or
anecdotal suggestion that the financial world has had a M
M
difficult time in terms of remuneration, over the past few
N
N years — if indeed it has.
O
O
26. Accordingly, there is nothing reliable or even factual P
P generally to justify my departing from an approach to the
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effect that the plaintiff would have, and should have
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continued to reap the same financial rewards from the R
R defendant company over the interim period to date,
S
S
consistent with the terms of his contract.
T
T
U
U
V
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 - 11 - A
A
B
B THE TAX POSITION
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C
27. Should any part of the award of damages (under either head)
D
D be subject to deduction for tax?
E
E
The sixmonth period of notice award F
F
G
G 28. Prior to the 2012/2013 year of assessment in Hong Kong,
H
payments made in lieu of notice in accordance with the
H
contract of employment would not have been assessed for I
I tax. The sixmonth period of notice would have expired on
J
7/8 June 2011 and since the plaintiff’s award under this head
J
would not have been subject to tax at that time, the fact that K
K he receives the award after 31 March 2013 does not affect its
L
L
tax free status. What follows also applies to this head.
M
M
The award as damages for breach of trust and confidence N
N
O
29. This head of damage is based on just over two years loss of
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salary and contractual benefits. There is no evidence before P
P
me which supports any contention that tax, whether that
Q
Q applicable in Hong Kong or in Singapore, should be
deducted from any sum which I order to be paid to the R
R
plaintiff as damages under this head, whatever the basis used S
S for calculating the figure. The figure is therefore to be paid
T
gross and if the Inland Revenue were to claim any liability
T
for tax, then that would be the responsibility of the plaintiff. U
U It is not appropriate for me to devise some notional rough
V
V
 - 12 - A
A
B
B and ready calculation where there is no clear contingent
C
liability. That would be to defeat the principle adumbrated
C
by the Privy Council in Comptroller of Inland Revenue v D
D
Knight [1973] AC 428 at p 433. The court held that where a
E
E payment was made in respect of the loss of employment it
does not come within the ambit of a taxable payment. In F
F
Hong Kong, the Court of Final Appeal in Fuchs v
G
G Commissioner of Inland Revenue [2011] 2 HKC 422
H
considered very much the same situation. Ribeiro PJ put it
H
succinctly (at § 19): I
I
“It is wellestablished that damages obtained in a suit for
J
wrongful dismissal or a payment under a settlement agreement
J reached in such a suit are not regarded as income from
employment. Such a sum is properly regarded as deriving from K
K a cause of action arising after the contract has been discharged
by breach.” L
L
That therefore is an end to the matter unless legislation changes the
M
M situation.
N
N
CONCLUSION O
O
P
30. The awards are as follows:
P
Q
Q
HK$
R
R 6 months wages in lieu of notice 1,017,434.81
Restricted Stock Cash Grant 1,945,000.00 S
S
Retention Bonus 1,945,000.00 T
T 2011 Guaranteed Bonus 1,945,000.00
U
6,852,434.81
U
V
V
 - 13 - A
A
B
B
C
C Damages for breach of trust and confidence
Loss of salary – 8/9 June 2011 to 31 July 2013 D
D @SGD344,250.00 per annum.
26 months: SGD745,875.00 E
E

Discretionary bonus for 2012 F

F @US$250,000.00
G
Discretionary bonus for 7 months of 2013
G
@250,000.00: US$145,833.33
H
H
31. I have left these figures in the currency set out in the claim I
I
and identified for the most part in the plaintiff’s contract.
J
J Certain deductions have yet to be made to reflect the
plaintiff’s earnings during the period up to 31 July 2013. K
K
Once the parties have agreed those, and the currencies in L
L which the judgment is to be given, I will approve that figure
M
or those figures and incorporate them in the judgment.
M
N
N
O
O
P
P
(Conrad Seagroatt)
Q
Deputy High Court Judge
Q

Mr Ashley Burns SC, instructed by Howse Williams Bowers, for the R

R plaintiff
S
S Mr Jose Maurellet, instructed by Simmons & Simmons, for the defendant
T
T
U
U
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V