Chong Cheng Lin Courtney v. Cathay Pacific Airways Ltd

HCA 898/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 898 OF 2007

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BETWEEN

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Before: Hon Chung J in Court

Dates of Hearing:  5 to 8 October 2009

Date of Last Written Submissions:  5 December 2009

Date of Handing Down Judgment:  22 December 2009

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J U D G M E N T

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Introduction

1.The plaintiff commenced this action in January 2006 (in the District Court before its transfer to the High Court) claiming her entitlement to what has come to be known as “retiree travel benefit” (“RTB”) in this action.

Background

2.The factual background leading to this action is largely undisputed. It can be summarized as follows.

3.The plaintiff was employed by the defendant (“Cathay”) on 4 March 1979 as a cabin attendant, at the age of about 23. She was promoted through the ranks to Chief Purser. Her employment was put to an end by Cathay on 25 May 1993 with one-month’s wages in lieu of notice (see also para. 51 below). She was about 37 years old when that happened.

4.The word “dismissal” (and similar words) is deliberately avoided because one major issue in this action is whether the termination was “dismissal” for the purpose of RTB.

5.On 26 November 1998 (when the plaintiff reached age 42) she applied for RTB and retiree flight air tickets. The discounted air tickets were given to her shortly later. The RTB card was sent to her on 1 December 1998.

6.However, on 18 January 1999, Cathay wrote to the plaintiff informing her the RTB was withdrawn and the RTB card was issued by mistake.

7.The significance of the plaintiff’s age stems from the age requirements relating to RTB:-

“Retired staff … [is] eligible for concessional travel.  In the case of a single retiree, the concession will be extended to parents.  The following staff will qualify for retirement travel.

…

All female cabin attendants who have completed 10 or more years of service and have reached the age of 40;

All female cabin attendants who qualify by service but not by age, will become eligible upon reaching the age of 40” (clauses 6(d) and 6(e), the Handbook (see para. 10(a) below for the meaning of “Handbook”)).

Issues in this Action re: Liability

8.The pleadings (as they now stand) disclose in gist four main issues regarding liability:-

(a)  was RTB part of the employment contract between the parties;

(b)  if so, whether the plaintiff (whose employment has been terminated by Cathay) was a “retired” employee (the plaintiff’s case) or a “dismissed” employee (Cathay’s case), within the meaning of the RTB provisions;

(c)  if not, whether estoppel by convention and/or promissory estoppel applies;

(d)  whether the plaintiff’s claim in this action has been barred by the settlement reached by the same parties in an earlier defamation action commenced by the plaintiff.

Issue 1 : Was RTB Part of the Employment Contract ?

9.It is common ground the employment contract was formed, or was evidenced, by the following documents:-

(1)  the offer letter dated 2 February 1979 (“the offer letter”);

(2)  the conditions of service (which are updated from time to time).  The 13 February 1979 version and the 1 January 1986 revision are relevant (collectively “CofS” and respectively “1979 CofS” and “1986 CofS”).

10.The plaintiff contends that, in addition, the following documents also formed part of, or evidenced, the employment contract:-

(a)  the Staff Benefits Handbook (formerly known as “Staff Services Booklet”) (which is also updated from time to time) (“the Handbook”).  The August 1992 issue is relevant;

(b)  the Passenger Tariff Manual (“the Manual”).

This is denied by Cathay.

(1)  Was the Handbook “Incorporated” ?

11.A common feature in employment is that terms of the contract can come from sources outside of the contract “proper” (whether the contract is written or verbal). For example, terms can be incorporated into an employment contract from collective bargains, custom and practice or company handbooks: Butterworths Employment Law Guide (2005) 4^th Ed., para. 1.23 to 1.26. In relation to company handbooks, the learned authors said:-

“… a company handbook can be quite a substantial document containing some matters which are quire arguably intended to be contractual terms (even if not expressly incorporated), but also many matters which are more in the nature of what used to be called ‘work rules’, ie procedures and requirements for the smooth running of the business which remain within the managerial prerogative and discretion … ” (para. 1.26).

12.In Albion Automotive Ltd. v. Walker [2002] EWCA Civ 946, the employer appealed unsuccessfully against a claim for enhanced redundancy terms in lieu of the statutory redundancy entitlement. The issue was whether the enhanced terms were incorporated by custom and practice. The English court of appeal said this about whether the terms had been incorporated into the employment contract:-

“In Duke v Reliance Systems Ltd [1982] ICR 449 … a question arose whether any policy in regard to a retiring age had been communicated to employees or whether there was evidence of any universal practice to that effect. Browne-Wilkinson J giving the judgment of the EAT said at p 452 … :

‘A policy adopted by management unilaterally cannot become a term of the employee’s contracts on the grounds that it is an established custom and practice unless it is shown that the policy has been drawn to the attention of the employees or has been followed without exception for a substantial period.’

In Quinn v Calder Industrial Materials Ltd [1996] IRLR 126 … The EAT, Lord Coulsfield presiding, applied the reasoning in Duke, saying at p. 128, para 7:

‘In a case such as the present, the factors to which Browne-Wilkinson J referred are likely to be among the most important circumstances to be taken into account, but they have to be taken into account along with all the other circumstances of the case. Thus, for example, in our view, the question is not whether the period for which a policy has been followed is ‘substantial’ in some abstract sense, but whether, in relation to the other circumstances, it is sufficient to support the inference that that policy has achieved the status of a contractual term. Again, with regard to communication, the question seems to us not to be so much whether the policy has been made or become known directly to the employees … , but whether the circumstances in which it was made or has become known support the inference that the employers intended to become contractually bound by it.’” (emphasis supplied) (para. 7 and 8).

13.Similar observations have been made in Peries v. Wirefast Ltd., UKEAT/0245/06/DA (where the passages quoted above have been adopted):-

“The real issue arises out of the contract of employment. [The employer] had issued a document in 2003 and that document had used the mantra that it did not form part of the contract …

It is [the employer’s] case that as the original matter which gave the outlines and details was in a handbook that had the logo on it ‘this is not part of your contract’, that therefore it is said it cannot be something that can change into having contractual status.

We profoundly disagree with that …

The general principles of employment law are, of course, contractually-based but over a period of time something which starts off as a concession can ripen by custom and practice into a contractual right. In the case to which we are grateful we have been referred of Albion Automotive v Graham Walker and others …

A similar dictum comes from Lord Coulsfield in the Scottish EAT in Quinn v Calder Industrial Materials Ltd …

… to say this document is for information purposes only and does not form part of your contract of employment … does not … preclude a policy emerging based on custom and practice that hardens into a contractual entitlement … ” (emphasis supplied) (para. 3 to 6, 9 and 12).

Like the employer in Peries v. Wirefast (above), Cathay relies on the March 1990 issue of “Staff Services Booklet” as containing an introduction which stated the booklet was intended as a “guide” only. However, there is no such indication in the Handbook.

14.The factual circumstances show that RTB was intended by the parties to be part of the plaintiff’s employment contract.

15.First, RTB has been followed for a substantial period to support such an inference:-

(1) RTB was already offered as early as in the 1980’s;

(2) during the said period, RTB has been applied consistently by Cathay (save where exceptional circumstances were involved), and such consistent application has been accepted by the cabin attendants.

16.Evidence regarding the above can be found in the testimony of the plaintiff (see also her supplemental witness statement, para. 4), two of Cathay’s witnesses (Mr Nipperess and Mr Ho) and some of Cathay’s documents (such as Cathay’s memos dated 27 July 1971 and 10 August 1974, Staff Services Booklet (at p. 59), the Manual (1988/89 version), the Handbook (1991 version), and Cathay’s letters dated 11 February and 10 May 1993).

17.Cathay’s case relating to an alleged “retiree policy” will be dealt with under the sub-heading “(2) Was There a Retiree Policy?” (para. 65 to 75 below).

18.Secondly, RTB was communicated to the plaintiff (and/or other Cathay’s cabin attendants) in circumstances which also support an inference the parties intended to be bound by it:-

(a) the plaintiff was made aware of RTB by her instructor during the training course shortly after March 1979;

(b) leaving aside sub-para. (a) above, the Staff Services Booklet and Handbook were intended to be (and were) issued to Cathay’s cabin attendants. The Handbook was updated from time to time;

(c) the Manual, which contains corresponding clauses relating to RTB, was issued to Cathay’s ticketing staff (who are (and were) expected to act in accordance with those clauses). It was also updated from time to time;

(d) Cathay introduced a “new” RTB in early 1993. It requested the cabin attendants (and other concerned staff) to indicate in writing whether they wished to opt for the “new” scheme. Those who did not do so were treated as having opted for the “old” scheme.

19.But it does not mean the whole of the Handbook should (or has) become a contractual document in its entirety. This is because there are parts in it which clearly are not contractual, but merely informative. For example:-

“INITIAL ACCOMMODATION

…

Notice on Moving Out

The YMCA require THREE days prior notice of moving out. They will give you a letter stating the checkout time and date. …

…

PERMANENT ACCOMMODATION

GENERAL

[Cathay] will do its best, through Staff Housing Section, to help you to find suitable accommodation when required to do so. The initiative, however, must remain with the individual … ”.

Other parts of a similar nature include information concerning how to terminate a tenancy, rent control and security of tenancy in Hong Kong and how to look for accommodation in Hong Kong. There is also an address list of registered doctors for Cathay’s medical benefit scheme.

20.But there are parts in the Handbook which apparently even Cathay accepts should have binding effect:-

(1) rates of payment for the rental assistance scheme set out in the Handbook (different from those set out in the CofS);

(2) a time-limit for 3 months for claiming medical expenses (not found in the offer letter or the CofS);

(3) items of exclusion from the medical benefit scheme listed in the Handbook (in addition to, or different from, those listed in the CofS);

(see the testimony of Mr Nipperess to such effect).

21.By reason of the matters set out above, I conclude that the provisions in the Handbook relating to RTB have been incorporated into the employment contract between the parties, and were intended to have contractual effect.

22.As stated in para. 10(a) above, the August 1992 issue of the Handbook is relevant in this action. This is because a full version of only that Handbook has been produced (the earlier issues have not been produced). Cathay argues the Handbook was incapable of being incorporated into the plaintiff’s employment contract by reason of timing. By reason of the matters in para. 14 to 21 (especially para. 15 to 18) above, it can be inferred that RTB became part of her contract either when the plaintiff was informed of RTB during her training course (in which case, the Staff Services Booklet and/or the Handbook can also be regarded as evidence of part of her contract, if not part of her contract in fact), or when the Staff Services Booklet and/or the Handbook was/were next issued to Cathay’s cabin attendants after the plaintiff’s employment (in March 1979).

23.Cathay also makes the point the plaintiff has not personally seen the Staff Services Booklet at the start of her employment. Bearing in mind the test is objective (that is, the test is whether the “policy” was intended to apply to someone in the plaintiff’s position), that matter is irrelevant.

24.In reaching the above conclusion, I have taken into account the two cases relied upon by Cathay: Alexander and Others v. Standard Telephones & Cables Ltd. [1991] IRLR 286 (at para. 31) and Wandsworth London Borough Council v. D’Silva [1998] IRLR 193 (at para. 29). There is nothing inconsistent between those two cases and the cases referred to in para. 12 and 13 above with regard to the factors which should or should not be taken into account.

25.Cathay relies on the plaintiff’s “admission” made during her cross-examination to the effect she regarded the documents constituting the employment contract to be the offer letter and the CofS. I agree with her counsels’ submission: one, a factual witness’ “admission” of a matter which is in the nature of a point of mixed law and fact carries little weight (if any at all), and two, the fact she commenced and persists with this action is inconsistent with such an “admission” (which can be called an “uninformed” admission).

26.Cathay also places emphasis on the decisions in Cathay Pacific Airways Ltd. v. Kelly (above). On appeal to the High Court, the court said:-

“… the [Labour Tribunal] made the following findings in [the] reasons for decision:

‘The various Staff Benefits Handbooks were originated from the 1990 Staff Services Booklet, which clearly stated that it was not a contractual document but only a guide.

… However, I find that [the Handbook was] evidence of contractual benefits enjoyed by [Cathay’s] cabin attendants from time to time. … [The Handbook was] issued to [Cathay’s] cabin attendants … and they continued to work for [Cathay] on the understanding that they were entitled to the benefits referred to in the [Handbook]’ … ”

(para. 21 thereof, quoting from para. 49 and 51).

27.The parties in that appeal chose to approach the matter purely as a matter of construction of clause 17 of the version of CofS dated 1 May 1981 (see para. 23 to 26 of the appeal judgment). The court of first instance also dealt with the appeal on that basis (see para. 27 to 29 of the appeal judgment). This was how the court of appeal understood to be the approach (see para. 25, 29 and 33, court of appeal judgment). The remarks of the court of first instance that:-

“… There was however no evidence that [the Handbook] had been incorporated into the employment contract” (para. 30 of the appeal judgment)

have to be understood in the above context.

28.The issues raised by the pleadings herein, and consequently the evidence adduced at trial, are different from the decisions in Kelly. Those decisions are therefore of very limited use to the determination of this action.

(2) Past Consideration ?

29.When considering this issue, one should keep in mind another feature which differentiates employment contracts from most other kinds of contract: the overwhelming majority of employment contracts are continuing in nature, coupled with an employment environment which can be ever-changing.

30.Further, the complex socio-economic environment nowadays has brought about many equally complicated employment relationships (relative to those relationships in the past). This has particularly been so in relation to employment with large corporations. It is common to find departments set up in these corporations specifically for handling employment-related matters.

31.Employment law has “evolved” to take account of these characteristics: Dix, Crump & Pugsley: Contracts of Employment (1997) 7^th Ed., para. 3.08.

32.The doctrine of “consideration” can sometimes pose difficulties when it is applied to employment contracts. For instance, it is common to find cases of wage increase without any corresponding change of post or work. The full rigour of that doctrine will very likely mean the employee cannot legally enforce his claim for the increased pay because he has provided no new consideration in return for it.

33.But it would be rather inconceivable the courts would reach such an unjust result. As has been said in City Polytechnic of Hong Kong v. Blue Cross (Asia-Pacific) Insurance Ltd. [1995] 2 HKLR 103, judicial decisions showed:-

“… a trend towards a pragmatic appraisal of consideration in commercial relationships, expounded by Lord Wilberforce … on behalf of all the Law Lords in New Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd., [1975] AC 154, at p.167C :

‘It is only the precise analysis of this complex of relations into the classical offer and acceptance, with identifiable consideration, that seems to present difficulty, but this same difficulty exists in many situations of daily life [various examples were then set out]. These are all examples which show that English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance and consideration’” (emphasis supplied) (p. 109).

34.The case law relied on by the parties in respect of this aspect has to be looked at in the light of para. 29 to 33 above.

35.Of the case law relied on by Cathay in its written final submissions, the following involved an employment context:-

(a) Stilk v. Myrick (1809) 2 Camp 317;

(b) Lee and Others v. GEC Plessey Telecommunications [1993] IRLR 383;

(c) Sumitra Jayasena Kelly v. Cathay Pacific Airways Ltd., HCLA 10/2004 (20 April 2005);

(d) Cathay Pacific Airways Ltd. v. Sumitra Jayasena Kelly, HCLA 94/2005 (3 October 2006); HCMP 2448/2006 (18 April 2007);

(e) Cheung Ting Wan and Others v. RIS Computers Ltd., HCLA No. 16/1986 (20 June 1986);

(f) Lajom, Esperenza Cruz and Others v. Cathay Pacific Airways Ltd., HCA 6733/1999 (4 March 2005).

36.The other cases were about non-employment situations: Williams v. Roffey Bros & Nicholls (Contractors) Ltd. 1991] 1 QB 1 (carpentry contract), South Caribbean Trading Ltd. v. Trafigura Beheer BV [2005] 1 Ll Rep 128 (sale of fuel oil), In re Selectmove Ltd. [1995] 1 WLR 474 (inland revenue); Re Tse Sheung Yan, ex parte Chekiang First Bank Ltd., HCB 62 & 484/2000 (7 July 2000) (debt repayment); North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. and Another, The Atlantic Baron [1978] 3 All ER 1170 (ship building).

37.In the following employment cases (being part of those set out in para. 35 above), the courts found consideration in support of the additional benefits.

38.Lee v. GEC (above) was concerned with whether the employer could “withdraw” enhanced severance payments contained in a statement issued earlier. The English court said:-

“The defendants [employer] say that there was no consideration given by the plaintiffs or any other of the employees … for the introduction of the enhanced terms into the individual contracts. …

… the plaintiffs assert … the employee gives consideration …

The consideration is, they say: (a) the employee continuing to work; and (b) not continuing with his pay claim, so that the employer avoids industrial action and benefits from the continued services of a known employee.

In my judgment the arguments advanced by the plaintiffs are correct. … ” (para. 112, 116, 117 and 119).

39.Cheung Ting Wan v. RIS (above) involved a claim for commission. In dealing with the argument of whether there was consideration in support of a contract variation, the court said:-

“I respectfully agree with Mocatta J [in North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd., The Atlantic Baron [1978] 3 All ER 1170]. Therefore, there must be identified something, which is capable of amounting to consideration. … it can legitimately be held that, as the commission scheme was expressed to be as an incentive, the consideration was harder work on the part of the employees. … ” (p. 5).

40.The above test was adopted in Lajom v. Cathay Pacific (above), albeit in the context of finding an estoppel (at para. 151).

41.The learned author of Selwyn’s Law of Employment (2006) 14^th Ed. said:-

“[after referring to Lee v. GEC (above)] … It was not necessary to give fresh consideration every time a new collective agreement was reached, for a continuation by the workforce in their employment was a value attributed to the employer … ” (para. 3.65).

42.In this action, there is evidence of consideration in the sense set out in para. 38 to 41 above:-

(1) it is accepted RTB was Cathay’s way of recognizing the contribution, or long service, of cabin attendants (among some of its other staff);

(2) RTB was a reason why the plaintiff decided to remain with Cathay;

(3) benefits similar to RTB have also been provided by other airlines. It can be inferred RTB (among other benefits) can be a useful means for maintaining (if not improving) the morale of Cathay’s staff, and/or for attracting and/or retaining good quality and/or experienced staff.

Issue 2 : Was RTB an “Entitlement” and If So What Was It ?

43.The plaintiff relies on the use of words like “entitlement”, “entitled”, “eligibility”, “eligible” and “qualify” in some of Cathay’s documents relating to RTB to support her argument that RTB was an entitlement.

44.Those words are (at least on their face) consistent with a relationship which was intended to be binding. But their true meaning needs to be ascertained in the light of the relevant surrounding factual circumstances: Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896, 912.

(1) “Retirement” v. “Dismissal” v. “Termination”

45.The background giving rise to this issue is summarized as follows.

46.Clause 25(A), 1986 CofS sets out the provisions for resignation and retirement. The relevant parts read:-

“… When a cabin crew member is required to resign or retire by [Cathay], he/she will be given one month’s notice or one month’s pay in lieu of notice, except as provided in Clauses 27 & 28”.

(A cabin crew member can also initiate resignation by giving the same notice or paying the same amount: clause 25(A).)

47.Clause 21(A), 1979 CofS is similar to clause 25(A) (above) (except that clause 21(A) refers to “resignation” only).

48.“Normal retirement” has been defined in clause 25(C), 1986 CofS. In relation to female cabin attendants, it means:-

“… on attainment of age 40 … subject to the completion of 10 years’ service”.

49.Clause 27, 1986 CofS (with a heading “Discipline”) specifically deals with summary dismissal:-

“Any cabin crew member who neglects or fails to perform his/her duties to the satisfaction of [Cathay], or who is guilty of unsatisfactory conduct including smuggling, embezzlement, malfeasance, insubordination, illicit trading, betrayed of trust or confidence, will be liable to dismissal without notice or benefit … ” (emphasis supplied).

The payment to which a cabin crew member dismissed pursuant to clause 27 is entitled is set out in clause 28, 1986 CofS:-

“Should a cabin crew member be dismissed for any breach of regulations as set forth in Clause 27 he/she will be paid up to the date of dismissal”.

For present purposes, the effect of clauses 27 and 28, 1979 CofS is the same as clauses 27 and 28 quoted above.

50.The express provisions of the 1986 CofS have in effect categorized contract termination into:-

(a) resignation (clause 25(A));

(b) required resignation or retirement (clause 25(A));

(c) normal retirement (clause 25(C));

(d) summary dismissal without notice or benefit (clause 27);

(e) dismissal other than summarily; that is, dismissal with notice or pay in lieu of notice.

51.The facts concerning the plaintiff’s dismissal are undisputed. On 25 May 1993, Cathay said in its letter addressed to the plaintiff:-

“Further to our recent discussions concerning the incident involving Company property that happened in Singapore last week and your unsatisfactory explanation thereof, I write to advise that your services will be terminated with immediate effect from today … You will be paid one month’s salary in lieu of notice. … ”.

52.Thus, the plaintiff’s employment was not terminated pursuant to clause 27 or 28, 1986 CofS. Further, because of the pleadings, the propriety (or otherwise) of the plaintiff’s conduct has not been made an issue in this action. Consequently, no evidence or argument has been put forth in this regard.

53.It is Cathay’s case:-

(1) as the plaintiff accepted in her testimony, she did not retire from Cathay; she was dismissed by Cathay instead (albeit not summarily);

(2) because the plaintiff’s “dismissal” was not effected pursuant to any express terms of her employment contract, the “dismissal” could only have been effected pursuant to s. 7, Employment Ordinance (Cap. 57);

(3) by reason of the language used in the RTB provisions, RTB has only been made available to cabin attendants who “retired” (or resigned);

(4) consequently, for RTB purposes, no valid distinction can be made between a s. 7, Cap. 57 dismissal and one effected pursuant to clause 27 of the Handbook.

54.On the other hand, the plaintiff contends that a distinction has always been maintained by Cathay between employees who were summarily dismissed (where there is no RTB entitlement) and those who were not (where there is such entitlement). In other words, a “special” meaning has been given to “retired” and “retiree” by Cathay (see also Chitty on Contracts (1999) 27^th Ed., Vol. 1, para. 12-119).

55.In support of this contention, reliance is placed by the plaintiff on several matters.

56.In answer to the plaintiff’s request for clarification of why Cathay claimed the RTB card was issued by mistake, Cathay wrote on 12 April 1999:-

“… While it is true to say that crew resigning or retiring with 10 years service are entitled to have access to [RTB], such is not available to staff who have been dismissed or whose services have been terminated.

… your employment was terminated … ” (emphasis supplied).

The plaintiff argues Cathay has in the letter purportedly given “equal” treatment to the two types of employees. But she asserts this “equal” treatment was ex post facto and wrongful. She asks the court to note Cathay still differentiate between “dismissal” and “termination” in the letter nevertheless.

57.Another cabin crew was dismissed in April 2000 with 1 month’s salary in lieu of notice. In answer to her query about her entitlement to (among other things) RTB, the solicitors then acting for Cathay (not JSM) wrote on 18 April 2000:-

“We refer to our telephone conversation earlier this afternoon. … During the course of our exchange, … we were asked to comment on …

Whether [the cabin crew] would be entitled to [RTB] …

We spoke generally on … [this] … but stressed that we would need to seek instructions from [Cathay]. Having done so we can now confirm the following:-

… As [the cabin crew] has not been summarily dismissed she will be entitled to the same [RTB] as any other employee whose employment has been terminated by [Cathay] giving either notice of termination or a payment in lieu of such notice. … ” (emphasis supplied).

Further, on 25 April 2000 (about 1 week later), the solicitors supplied various standard form documents to be filled in by the cabin crew.

58.The solicitors “backtracked” from this answer on 8 December 2000 (about 3-1/2 months later) in an apparently “unprovoked” letter to the cabin crew:-

“Earlier in the year we wrote to your solicitors on behalf of [Cathay] …

We are instructed that a long standing policy of [Cathay] provides that no [RTB] will be awarded to former staff whose employment has been terminated by [Cathay]. In such circumstances, you are hereby informed that you are not entitled to any [RTB]” (emphasis supplied).

It can be inferred the “long standing policy” referred to above was the policy discussed under the sub-heading “(2) Was There a Retiree Policy ?” below.

59.It is the plaintiff’s case the change of stance of Cathay’s solicitors was caused by her claim against Cathay for RTB (which led to this action). Correspondence between her and Cathay on the subject commenced on 18 January 1999. By October 2000, JSM referred to:-

“… the policy of [Cathay] not to make available [RTB] to staff, who have [been] dismissed or whose services have been terminated. This has been [Cathay’s] long standing policy … ” (emphasis supplied) (letter of 19 October 2000).

Again, the “policy” must have been that discussed under the sub-heading “(2) Was There a Retiree Policy ?” below. When more details about the policy were sought, JSM wrote on 3 November 2000:-

“We are instructed that the policy is not to be found explicitly in any written document at the material time but has been in existence for several years” (emphasis supplied).

60.The subject will be discussed in more detail below (see para. 65 to 75 below). In brief, as part of the fact-finding exercise, the alleged policy referred to in para. 58 above and 65 below is not accepted.

61.By reason of the matters aforesaid, I agree with the plaintiff’s contention summarized in para. 54 above, and reject Cathay’s case to the contrary (see para. 53(3) and (4) above).

62.In the context of a contract, the relevant time for ascertaining the real intention of the contracting parties is of course the time of formation of the contract: Chitty:-

“… ‘the meaning which the [contract] would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract’ … ” (para. 12-043, quoting from Investors Compensation Scheme v. West Bromwich Building Society (above)).

63.In this action, (as has been found above) RTB became part of the plaintiff’s employment contract by reason of the incorporation of the Handbook. The relevant time for the purpose of para. 62 above would thus be the time of such incorporation. In this connection, the finding set out in para. 22 above is repeated here.

64.It is also important to note, during the period when the plaintiff was still employed by Cathay, it is not Cathay’s case its “policy” in this respect has changed over time: (see also para. 39(9), Cathay’s reply submissions).

(2) Was There a Retiree Policy ?

65.It is Cathay’s case that RTB is and was merely a company policy. This contention has been dealt with under the heading “Issue 1: Was RTB Part of the Employment Contract ?” above. Cathay also alleges RTB has only been made available to retired employees (resigned employees included) who fall within the policy. Employees who have been dismissed (or whose employment has been terminated other than by retirement) do not belong to that category. The company policy will be called “retiree policy” below.

66.In short, I agree with the plaintiff there is no credible or reliable evidence about the retiree policy. The reasons for the conclusion are:-

(a) besides the Cathay letter dated 24 January 1990 (see below for details), there is no document bearing a date prior to May 1993 which recorded the origin, or content, of the retiree policy (which supposedly has been long-standing, and likely to be applicable to many members of Cathay’s staff);

(b) no one can recall the circumstances under which the retiree policy was conceived;

(c) there is a time discrepancy relating to the commencement of RTB. Cathay’s two witnesses testified it originated since the 1980’s (that is, more than a decade or so before November 2000) but its letter dated 3 November 2000 states that the policy “has been in existence for several years” (see also para. 59 above).

67.The way in which Cathay’s staff (in the Benefits Centre of the Employee Services section of the Personnel Department (“the benefits centre”)) handled the plaintiff’s application for RTB is also telling.

68.The explanation given by Ms Ng, the manager in charge of the benefits centre, for the mistake was this. The benefits centre was a new establishment which was to administer a new flexible benefits scheme (this was launched in April 1997). It was then in the process of integrating the various staff benefits. The deadline for the exercise was December 1998. In addition, some of the staff in the Personnel Department were about to be made redundant or transferred out.

69.Ms Ng’s witness statement also said some of the benefits centre staff were transferred from the other sections of the Personnel Department.

70.In relation to RTB, she said:-

“Given the variance in the eligibility criteria applicable to different categories of retired staff members, the policy … was not easy to administer. … [My predecessor] did not make clear to me or to my subordinates that we ought to check the reason for the employee’s cessation of employment … ” (emphasis supplied) (para. 9, Ms Ng’s witness statement”).

Thus, when handling the plaintiff’s application:-

“Using the [RTB] checklist … my subordinate … sought to determine [the plaintiff’s] eligibility to apply for [RTB]. … However, being unaware of the need to check any additional matters, my subordinate did not check the reason for [the plaintiff’s] cessation of employment … ” (para. 11, Ms Ng’s witness statement).

Mr Nipperess (Ms Ng’s superior officer) later happened to discover that the plaintiff’s RTB application was approved and he told Ms Ng of the mistake.

71.I agree with the plaintiff the fact that:-

(1) the checklist did not require an RTB applicant’s reason for termination to be checked;

(2) no one in the benefits centre (including Ms Ng’s predecessor and the staff transferred from the Personnel Department) thought about doing so,

throws the alleged retiree policy into doubt.

72.In a letter dated 24 January 1990 from Cathay to a Mr Salamon, Cathay’s former director of personnel and training, Cathay said:-

“[we] … regret to inform you that [RTB is] not granted to employees who are ‘terminated’ from their post”.

73.Two matters bring suspicion upon Cathay’s said letter:-

(a) the said letter purported to be a reply to Mr Salamon’s letter dated 8 December 1989. But Cathay was unable to produce the last-mentioned document;

(b) Mr Salamon denied having sent the letter to Cathay in his letter and affirmation. More importantly, he confirmed he was only aged 38 years old in 1989 and was not yet eligible for RTB then.

Mr Salamon has not testified at trial (nor has the author of Cathay’s 24 January 1990 letter). However, his age should have been easily ascertainable from Cathay’s records, but Cathay has not disputed his age (though Cathay insists that the said letter has been sent to Mr Salamon).

74.In view of the above, no weight is placed on the said letter.

75.Finally, Cathay relies on certain tables produced by Mr Nipperess (including those produced during cross-examination). I agree with the plaintiff no weight should be placed on them mainly because they were prepared for litigation purposes.

Issue 3 : Estoppel by Convention / Promissory Estoppel

76.Having concluded in the plaintiff’s favour in relation to the two issues above, it is unnecessary to deal with this issue. I shall do so for completeness.

77.The following summary of the relevant legal propositions are undisputed:-

“In the recent case of Unruh v Seeberger [2007] 2 HKLRD 414, the Court of Final Appeal authoritatively stated the principles in relation to a plea of estoppel by convention. … Those principles are summarized below:-

(1) ‘[T]he parties must enter into some legal relationship on the basis of an assumption that is shared by or common to them both’ (paragraph 133). The word ‘transaction’ is ‘to be understood in the broad sense of the parties engaging in acts or omissions affecting their mutual legal relationship’ (paragraph 142).

(2) ‘[T]here is no necessity for the parties or either of them to believe that the assumed state of affairs is true. Nor is it necessary for them … to have been mistaken about the matters assumed’ (paragraph 136). ‘What is important is for them to act in the belief, manifested by words or conduct, that they are both proceeding with the transaction on the basis of the same shared assumption’ (paragraph 137).

(3) ‘The matter assumed must be clear’ (heading to paragraph 138).

(4) ‘The assumption may be about fact or law’ (heading to paragraph 140).

(5) ‘[T]here must be an attempt by one party to depart from the common assumption which departure would be unjust because of “the part taken by him in occasioning its adoption by the other party”’ (paragraph 150); and

(6) ‘[T]he other party would suffer detriment arising out of his having entered into the relevant transaction on the basis of the common assumption “if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption” when abandoning the common assumption’ (paragraph 150)” (emphasis supplied) (para. 14, plaintiff’s opening; para. 80, Cathay’s closing submissions).

Cathay also draws attention to the requirement that the common assumption must be communicated between the parties.

78.On the strength of the factual findings set out above, if, for some reason, the plaintiff should still be unable to establish her case in contract, those facts will enable her to successfully rely on an estoppel by convention.

79.The same applies to her case based on promissory estoppel. However, I agree with Cathay that the doctrine can only be used “as a shield” but not “as a sword”.

Issue 4 : Is this Claim Barred by the Earlier Court Settlement ?

80.This aspect of Cathay’s case is based (among other things) on the Tomlin order made on 25 May 1998 (“the 1998 order”). Para. 23(4) of the re-amended defence reads:-

“On or about 25^th May 1998 the parties … arrived at a settlement agreement (‘the Settlement Agreement’) and signed a consent order staying all proceedings therein subject to the terms of the Settlement Agreement as set out in the schedule thereto” (emphasis supplied).

The rest of that paragraph in gist avers that the plaintiff (i) made a representation/promise she would not seek the grant of RTB, and/or (ii) waived any right to RTB.

81.The relevant clause in the schedule to the 1998 order stipulated:-

“[Cathay] do pay to the Plaintiff … [the sums are set out] … in full and final settlement of all and any claims which the Plaintiff may have against [Cathay] in respect of the subject matter of this action” (emphasis supplied) (clauses 1 and 2, Schedule to the 1998 order).

It is undisputed the “subject matter of [the] action” concerned a claim based on libel. The relief sought therein was damages, injunction and costs.

82.Finally, para. 23(8) of the re-amended defence pleads:-

“By her act as aforesaid the Plaintiff represented … and/or waived any right” (emphasis supplied).

83.The plaintiff’s “act” averred to in para. 23(8) has not been expressly defined (or particularized). But in view of the averments set out above (especially at para. 80 above), her “act” must include the Settlement Agreement (and hence the 1998 order). However, the rights, as expressly spelt out in the 1998 order (and hence should reasonably be clear to Cathay), were only those summarized in para. 81 above.

84.I therefore agree with the plaintiff her claim herein is not barred by the earlier settlement, nor has she waived her claim herein.

85.Lest there be any possible argument as to whether this part of Cathay’s case can or cannot be divorced from the Settlement Agreement, it is put to rest by Cathay’s application for leave to further re-amend its defence (see under the sub-heading “(3) Cathay’s Proposed Alternative Case” below).

Conclusion on Liability

86.I am satisfied the plaintiff has established Cathay’s liability for her entitlement to RTB.

Relief / Quantum

87.The first relief sought by the plaintiff is specific performance by the issuance of:-

(1) an RTB card to the plaintiff;

(2) concessional air tickets to the plaintiff and her parents,

in accordance with the RTB contractual provisions. Related declaratory and injunction orders are also sought. Cathay has not commented on these. It is appropriate to make an order in terms of para. (1A) to (1), prayer for relief.

88.The plaintiff also seeks damages. Cathay contends she should not be entitled to any.

89.By the time all the written final submissions have been lodged with court, the plaintiff’s claim for damages is limited to the loss arising from the difference between the amounts she actually paid and those which she could have paid if Cathay had afforded her RTB. The amounts of such loss are:-

(a) the estimated net loss for the plaintiff’s flights for the period from March 1999 to February 2009 ($60,687);

(b) the estimated net loss for the flights of the plaintiff’s parents for the period from November 2000 to August 2009 ($88,856)

(total: $149,543).

90.The original claim for damages (as pleaded) was based on the travelling “pattern” of the plaintiff and her parents. It totalled about $2.35 million. That claim is effectively abandoned.

91.The “actual loss” claim was only sought at the time of trial. However, the details of that claim were served on Cathay at the start of the trial (in tabulated form). Cathay has had the opportunity of examining them and cross-examining the plaintiff about them.

92.I accept the accuracy of the amounts of actual loss now claimed by the plaintiff. There is no likelihood of irreparable prejudice to Cathay.

93.For those reasons, judgment will be entered in the plaintiff’s favour for $149,543.

Other Matters

94.These matters are set out below under separate sub-headings.

95.For the record, leave to further amend the re-re-amended statement of claim is granted: para. 3A, 8 and 11 of the draft (see also para. 96 below).

(1) Witnesses’ Credibility and Reliability

96.To recap, my assessment of the witness’ credibility and reliability is:-

(1) the plaintiff: see para. 15 to 16, 18, 87 and 89 to 90 above;

(2) Mr Nipperess: see para. 15 to 16, 20, 56 to 60, 66 and 72 to 75 above;

(3) Ms Ng: see para. 66 and 68 to 71 above. Her knowledge about the retiree policy originated from Mr Nipperess entirely. It is hearsay in nature. No weight should be attached to it;

(4) Mr Ho: see para. 15 to 16, 56 to 60 and 66 above.

(2) Plaintiff’s Proposed New Case

97.Because I already decided in the plaintiff’s favour on her original case, it is strictly unnecessary to deal with this aspect. I shall do so for completeness.

98.On 6 October 2009 (day 2 of the trial), the plaintiff sought leave to further amend her re-re-amended statement of claim. Among the proposed amendments is the addition of a claim based on gift (para. 12A and para. (2), prayer for relief, draft). This is opposed by Cathay (but the other proposed amendments are not opposed).

99.In short, I agree with Cathay that leave to add the new case should be refused for the following reason.

100.The plaintiff accepts the new case is premised on a gift of a chose in action (para. 150, plaintiff’s closing submissions); the subject-matter of the gift being the RTB card. This analysis is correct because:-

“As its alternative name ‘things (or choses) in action’ plainly indicates, intangible property cannot be physically enjoyed in and of itself. It consists of an entitlement arising from obligations that are enforceable by legal action”: Bridge: Personal Property Law (2002) 3^rd Ed., p. 144.

101.Ms Ng’s testimony is to the effect that the RTB card was nothing more than a document of identity. The holder has to present it when seeking RTB. But entitlement depends on a “vetting” process which the staff of Cathay’s ticketing office will have to undertake before deciding if the holder should be issued with discounted air tickets.

102.A chose in action cannot validly be “given” by delivery. As Bridge said:-

“… In the case of intangible property (or things in action), simple physical delivery and a consensual intention to effect a conveyance have never been feasible methods of transfer” (p. 144).

Similar observations were made in Crossley Vaines: Personal Property (1967) 4^th Ed.:-

“A chose in action cannot be effectively given by delivery of the document by which it is represented. To this rule there are only two exceptions: negotiable instruments are transferable by delivery, and the delivery of certain indicia of title to choses in action may in the appropriate circumstances constitute valid donationes mortis causa” (p. 304).

(3) Cathay’s Proposed Alternative Case

103.Cathay took out a summons for leave to further amend its defence on 30 October 2009 (after the parties have closed their case and directions regarding written final submissions have been given). In gist, Cathay seeks to advance a case that the plaintiff has waived her right to claim for RTB by reason of the agreement which is to be found in the parties’ correspondence leading to the 1998 order (especially a letter dated 20 May 1998).

104.I agree with the plaintiff that it is too late for the application for leave to be made. I also agree Cathay’s intended new case does not rest on facts which are relevant to its original case (based on the Settlement Agreement). Further:-

(a) the 20 October 1998 letter was an acceptance of the terms set out in a letter from Cathay’s counsel dated 15 October 1998 which asked for “… the Plaintiff’s action be stayed by Consent except for the purpose of carrying into effect the following terms – to be set out in a Schedule to a Tomlin Order … ”. Thus, there is no valid ground for contending the Settlement Agreement was somehow to be found elsewhere than the 1998 order;

(b) alternatively, if Cathay should argue that those letters and the 1998 order ought to be understood in the light of the circumstances surrounding them, the trial may well have to be “re-opened”. No valid reason has been put forth to justify such a course of action.

105.Cathay’s application for leave is therefore refused.

Costs Order Nisi

106.There is no apparent reason to depart from the usual rule that costs should follow the event. There will accordingly be a costs order nisi pursuant to Ord 42 r 5B(6) that the costs of this action (including any reserved costs) be paid by Cathay to the plaintiff to be taxed if not agreed.

Mr Martin Lee SC leading Ms Frances Lok, instructed by Messrs Lo, Wong & Tsui, for the Plaintiff

Mr Ashley Burns, SC, instructed by Messrs JSM, for the Defendant

Appeal by the defendant to Court of Appeal dismissed. Please refer to CACV7/2010 dated 16 November 2010