Ko Hon Yue v. Chiu Pik Yuk, The Wife and Intended Adminstratrix of Liu Ching Leung, Deceased and Others
Read the full judgment text of FACV 8/2011 on BabelCite. This Court of Final Appeal judgment was delivered on 23 February 2012 before Chief Justice Ma, Mr Justice Bokhary PJ, Mr Justice Chan PJ, Mr Justice Ribeiro PJ, Sir Anthony Mason NPJ.
Employment law – contract of employment – teacher at aided secondary school – termination of employment – construction of Conditions of Service read with Code of Aid for Secondary Schools (COA) and Employment Ordinance (Cap 57) – teacher commenced teaching in 1990 and received four warnings between 1995 and 1999 following unsuccessful promotion application – defendants' solicitors' letter of 20 July 2000 stated contract would not be renewed on 31 August 2000 and enclosed one month's salary in lieu of three months' notice – plaintiff transferred to FK-LMST School for 2000/2001 academic year after Education Department intervention – further complaints led to defendants' solicitors' letter of 13 July 2001 terminating employment with immediate effect with one month's salary in lieu of notice – first Labour Tribunal claim (for arrears of wages) settled in December 2002 – second claim transferred to Court of First Instance – whether the defendants could lawfully terminate the plaintiff's employment – whether clause 56(c) of the COA (three months' notice) is a self-standing provision – whether the one-year 'Period of Employment' clause permitted termination by effluxion of time – whether the Termination Clause in the Conditions of Service overrode the COA – whether Employment Ordinance s 5(2) and s 6(2)(a) applied so as to permit termination on one month's notice – and whether bringing the second claim constituted an abuse of process (Henderson v Henderson abuse) – held, the COA was expressly incorporated into the contract; the Termination Clause in the Conditions of Service was intended to repeat the COA's termination requirements under clause 54(c)(vii) and was to be read with clause 56 and Appendix 17 of the COA, not to override them – clause 56(c) was not self-standing but had to be read with clause 56(g) and Appendix 17, which required dismissal or termination (including non-renewal) for 'good and sufficient reasons' and compliance with the warning procedures – the 'Period of Employment' clause did not permit termination by effluxion of time so as to bypass Appendix 17 – the Employment Ordinance did not assist because the contract was evidenced in writing and made provision for termination – the defendants could only lawfully terminate by complying with Appendix 17 – on the abuse point, the defendants waited until trial itself to raise the Henderson v Henderson abuse point; given the extensive preparation already undertaken, it was far too late to mount a strike-out application, and the Court of Appeal was entitled to reverse the trial judge's finding of abuse on that ground alone – appeal allowed in part; matter remitted to the trial judge to determine (1) whether the contract of employment was lawfully terminated (i.e. whether clause 56(g) and Appendix 17 were complied with, including whether there was a summary dismissal), and (2) if there was wrongful termination, the assessment of damages – order nisi that defendants pay 75% of plaintiff's costs – observation that the COA is poorly drafted and that an overall review is desirable.
Legal issues: Lawful termination of teacher's contract of employment under the Code of Aid · Abuse of process (Henderson v Henderson abuse) in bringing second action
Outcome: Appeal allowed to the extent that the matter is remitted to the trial judge to determine, in the light of the judgment, (1) whether the contract of employment was lawfully terminated by the defendants (i.e. whether the requirements of clause 56(g) and Appendix 17 of the COA were complied with), and (2) if there was wrongful termination, the assessment of damages. The Court of Appeal's finding of wrongful termination was set aside as founded on an incorrect view of the construction of the COA, but the abuse of process finding was reversed in favour of the plaintiff.
Cited by 124 cases · Cites 3 cases
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FACV No. 8 of 2011 IN THE COURT OF FINAL APPEAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION FINAL APPEAL NO. 8 OF 2011 (CIVIL) (ON APPEAL FROM CACV NO. 294 OF 2008) ____________________ BETWEEN
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_________________________ J U D G M E N T _________________________ Chief Justice Ma: 1.The present appeal concerns the construction of the terms of a contract of employment – in this case, the employment of a teacher (the plaintiff) at a secondary school – and the main issue before this Court is how the plaintiff’s employment could lawfully be terminated under the contract. There are, we understand, a number of contracts of employment regarding teachers in aided schools in Hong Kong that bear similarity to the present contract that is before us for determination. It was for this reason that leave to appeal was given by the Appeal Committee on 16 June 2011 to appeal from the Judgment of the Court of Appeal dated 19 November 2010, which had allowed an appeal from the judgment (after trial) of Chu J (as she then was) dated 4 August 2008. 2.Leave to appeal was also given on another ground in relation to abuse of process, that is, the abuse in raising issues in subsequent proceedings that could and should have been litigated in earlier proceedings between the parties. Over the years, this form of abuse has been known variously as Henderson v Henderson abuse (named after the decision in Henderson v Henderson (1843) 3 Hare 100), or res judicata in the wider sense, or Yat Tung abuse (named after the decision of the Judicial Committee of the Privy Council in Yat Tung Investment Co. Ltd. v Dao Heng Bank [1975] AC 581). A The plaintiff’s employment with the defendants: the contractual documentation 3.At all times material to the present case, the Fung Kai No. 1 Secondary School (“the School”) at Sheung Shui, in the New Territories, was an aided school within the meaning of s 3(1) of the Education Ordinance Cap 279. As defined in that provision, this meant that it received subsidies from the Government in accordance with the Code of Aid for Secondary Schools as amended from time to time (“the COA”). The COA and its terms are critical to the resolution of the issue of lawful termination in the present appeal. 4.The plaintiff started his career as a full time teacher in 1984, but it was in 1990 when he began his employment as a teacher at the School. He taught at the School until 31 August 2000 and then taught for one more year (until 31 August 2001) at an associated school, the Fung Kai Liu Man Shek Tong School (“the FK-LMST School”). Both the School and the FK-LMST School have the same sponsoring body (the Fung Kai Public School). Contractually, as we shall presently see, for these 11 years when the plaintiff taught at these two schools, his employers were the same. In the contractual documentation, the employers were stated to be the Management Committee of the School. These are the defendants. Originally, the defendants were named as the first defendants, with the School as the second defendant, but the School ceased to be a party early in the proceedings when the plaintiff agreed that the School was not a legal entity capable of being sued in its own name. In this judgment, I shall refer to the plaintiff’s employers as either the defendants or the School. A.1 The letter of offer and the letter of acceptance 5.The plaintiff began his employment as a teacher in the School for the 1990/1991 academic year (which began in September 1990). By a “Letter Offering Employment” dated 20 June 1990, the plaintiff was offered an appointment as a teacher at the School. The offer was made subject to the Conditions of Service which were attached to the letter, and the plaintiff was asked to sign copies of these Conditions as well as a letter of acceptance. 6.The letter of acceptance stated that the plaintiff accepted the appointment in accordance with the Conditions of Service, the Education Ordinance and its subsidiary legislation and also the applicable COA. A.2 The Conditions of Service 7.The Conditions of Service for the first academic year contained the following terms:-
A.3 The renewals 8.For the 1991/1992 academic year (beginning September 1991), the plaintiff was again required to sign a letter of acceptance following an offer letter from the School. The period of his probation was stated to be two years from 1 September 1990. The COA remained incorporated into the contract. 9.Save for the changes about to be highlighted, it can be taken for present purposes that the Conditions of Service remained the same. The most notable changes in the Conditions of Service for this academic year were in relation to the Termination Clause (relating to the notice required to be given by the School to terminate a contract) and to the Other Conditions clause (the material amendments are underlined):-
10.The same pattern of annual renewals continued for each academic year up to the 1999/2000 academic year, with offer letters given to the plaintiff and his being required to sign letters of acceptance. Again, it can be taken that the terms of the various documents remained the same, except for the following changes to the Conditions of Service:-
11.As mentioned earlier, the plaintiff changed schools for what turned out to be his final year of teaching. For this final year, he was transferred to the FK-LMST School. I shall in the next section of this judgment describe the circumstances of the transfer, but wish to deal for the time being only with the contractual position. 12.For this final year, both courts below proceeded on the basis that the plaintiff was transferred to teach at the FK-LMST School for the school year beginning September 2000, but he remained employed, albeit at a different school, by the defendants. The terms and conditions (insofar as they are material to the present appeal) remained the same as those contained in the contractual documentation for the 1999/2000 school year (although some additional terms, not material for present purposes, were also agreed: see para 21 below). Neither party before us contended otherwise. I therefore proceed (for the purpose of determining the issue of the termination of the plaintiff’s employment) on the basis that the relevant terms of contract are those contained in the contractual documentation I have described in this section, namely, the offer letter, the letter of acceptance, the Conditions of Service and the COA. Of particular relevance here is of course the contractual documentation for the 1999/2000 year. A.4 The Code ofAid 13.I have already made several references to this document. It is, in my view, a crucial document in the ascertainment of the relevant terms of the contract of employment between the plaintiff and the defendants. Chu J described the COA as being of “pivotal importance” and with respect, I agree with this view. In the present case, the terms of the COA were expressly incorporated into the contract between the plaintiff and the defendants (see paras 6 and 7(3)(a) above). In Lau Chi Fai v Secretary for Justice [1999] 2 HKLRD 494 (a decision of Keith J in the Court of First Instance) and the Court of Appeal’s decision in Chan Chi Loi v Cheng For and others, unreported, CACV 243 of 2003, 17 December 2004, the courts had to deal with the issue whether the terms of the COA, as a matter of contract, did apply to the contract between the teacher and the school in those cases. In the latter case, the Court of Appeal had to consider whether, notwithstanding the absence of any clause expressly incorporating the COA, its terms could be implied. The majority (Yeung JA and Yuen JA) thought not, Cheung JA was of the view they could. This issue does not arise in the present case owing to the express incorporation of the COA into the contract between the plaintiff and the defendants. 14.Chu J held that the terms of the COA were incorporated into the contract between the plaintiff and the defendants but only inasmuch as they set out the plaintiff’s obligations (rather than the defendants’) as stated in the letter of acceptance (see para 6 above) and no more. I agree with the Court of Appeal’s judgment that this view was too narrow. Clearly, with regard to the contractual documentation as a whole, the terms of the COA (as they affected both parties) were incorporated into the contract between the plaintiff and the defendants (subject of course to the defendants’ argument that where there was any conflict, the express terms of the Conditions of Service would prevail over the terms of the COA: see para 7(3)(b) above). 15.As mentioned (para 3 above), s 3 of the Education Ordinance makes specific reference to the COA in the context of aided schools in Hong Kong. The overriding importance of the document can be seen from clauses 1(a) and 3 of the Introduction to the Code:-
….
16.The COA is in 3 parts. Part I is the Introduction, Part II sets out detailed provisions relating to the grant of aid and Part III deals with the administration of aided schools. We are in this appeal concerned with the issue of how the plaintiff’s employment with the defendants could lawfully be terminated. This will involve an examination of the relevant terms of contract contained in the contractual documentation referred to, the COA and the Employment Ordinance. I will in due course set out all the relevant terms. For the time being, in introducing the COA, I would merely emphasize its importance in the context of aided schools. 17.Apart from the grant of aid, the admission of students into aided schools and the role of the Director of Education in overseeing the management and running of these schools, the Code also contains extensive provisions regarding the staffing of schools, and in particular, the position of teaching staff. As we shall see, many important provisions regarding teachers are contained in Part III of the Code. Part II, however, also deals with teachers in that reference is made to supply teachers and temporary replacements: see clauses 29 and 30 of the Code. The position of these teachers is to be contrasted with the position of more permanent teaching staff. I shall deal further with this distinction later. B The disputes between the parties leading to the present proceedings 18.The details of the disputes between the parties are contained in the judgments of the Court of Appeal and the trial judge. I am content merely to provide the gist of the disputes between the parties that have led to the present proceedings. 19.The plaintiff started teaching at the School on 3 September 1990, his subjects being English and EPA (Economics and Public Affairs). Following the plaintiff’s unsuccessful application for promotion to the post of Senior Graduate Master in 1994, according to the trial judge, the plaintiff’s relationship with the School began to sour. Between 1995 and 1999, the plaintiff received four formal warnings arising out of a number of incidents relating to what the Judge described as school administration. In March and April 2000, complaints were received from students at the School concerning the plaintiff’s teaching performance and behaviour, and a committee comprising 5 teachers was appointed to investigate these complaints. 20.There was an unresolved issue at trial as to whether, following the intervention of the Education Department, the School agreed to cancel all previous warnings made to the plaintiff (the defendants deny this although an officer from the Education Department maintained in correspondence that there had been an agreement to this effect). On 4 July 2000, the defendants decided at a meeting of the School Management Committee that the plaintiff’s employment should be terminated. By a letter dated 20 July 2000 from the defendants’ solicitors, the plaintiff was informed that his contract would not be renewed upon expiry on 31 August 2000. The letter also said (rather oddly and inconsistently) that notwithstanding that the plaintiff was liable to be dismissed summarily, he would be paid one month’s salary in lieu of three months’ notice. 21.It was through the intervention again of the Education Department that the School agreed to suspend the termination of the plaintiff’s employment and he was transferred to teach at the FK-LMST School for a year. This followed a meeting on 8 August 2000 attended by the plaintiff, representatives of the School and of the Education Department. The plaintiff agreed to the Minutes of this meeting insofar as they recorded an agreement that:-
The plaintiff disagreed with that part of the Minutes recording that the School only temporarily suspended the earlier termination of his employment and it was for this reason that he refused to sign the Minutes. The failure to sign the Minutes was relied upon by Mr Edward Chan SC (who represented the defendants in this appeal) for the purposes of an argument based on the Employment Ordinance Cap 57, to which I shall return in due course (see Section E.3 below). 22.Matters did not improve at the new school. The plaintiff’s work was regarded as unsatisfactory, and complaints were received from students and parents alike (although it has to be pointed out that the plaintiff did not accept the criticisms made about his work and performance). 23.By a letter dated 23 May 2001, the principal of FK-LMST School informed the Education Department that the School wanted to terminate the plaintiff’s employment at the end of the school year. The Education Department replied on 16 July 2001 stating its having no objection to this course. 24.By another letter from the defendants’ solicitors to the plaintiff dated 13 July 2001, reference was made to the plaintiff not having made any satisfactory improvement and to numerous complaints having been received from students and parents. The plaintiff was informed that his employment would be terminated “with immediate effect” and a cheque representing one month’s salary in lieu of notice was enclosed. 25.The plaintiff took the view he had been unfairly and unlawfully dismissed. In other words, the termination of his employment contract with the defendants was unlawful. The defendants took the opposite view. This was (and remains) the main dispute between the parties. C The proceedings in the present action C.1 The Labour Tribunal proceedings 26.After attempts to settle the disputes between them, the plaintiff eventually commenced proceedings against the School in the Labour Tribunal on 7 September 2002 (“the First Proceedings”) claiming only arrears of wages from 13 July 2001 (the date of the letter from the defendants’ solicitors) to 31 August 2001 (the end of the academic year). After three callover hearings, the claim was settled when the School agreed to pay the full amount claimed by the plaintiff ($76,758.00) in full and final settlement of his claim. This was recorded in an Order of the Tribunal made on 20 December 2002. 27.Notwithstanding this settlement, on 30 June 2003, the plaintiff commenced a second set of proceedings in the Labour Tribunal against the School, this time for unearned salaries from 1 September 2001 to 31 August 2017, loss of provident fund and loss of mortgage interest. In all, the amount claimed was $14,024,190.90. 28.On 4 September 2003, the Labour Tribunal transferred these proceedings to the Court of First Instance (pursuant to s 10 of the Labour Tribunal Ordinance Cap 25). These proceedings became the present action. C.2 The decision of Chu J and the Court of Appeal 29.As the somewhat voluminous pleadings in this action demonstrate, numerous issues had to be determined in the trial, and subsequently, following the dismissal of the plaintiff’s claim by Chu J, on appeal to the Court of Appeal. The dispute between the parties as I have identified in para 25 above, remained however in substance the real controversy between the parties. 30.Chu J, in para 52 of her judgment, identified the following eight issues that the Court had to resolve:-
31.The learned judge largely resolved each of these issues in favour of the defendants and dismissed the plaintiff’s claim. Her decision was reversed by the Court of Appeal, which held that the plaintiff’s employment with the defendants was not lawfully terminated, with the consequence that damages for wrongful termination should be awarded to the plaintiff. It was ordered that the assessment of such damages should be remitted to Chu J. 32.For the purposes of the present appeal, of those issues before the trial judge, only issues (1), (3), (4) and (5) are relevant for this Court’s determination. Issue (1) concerns the contention of the defendants that the present proceedings constitute an abuse of the process of the Court on the basis that the issues raised in the present action could and should have been raised in the first proceedings. Issues (3), (4) and (5) are relevant to the critical issue of how the contract of employment between the plaintiff and the defendants could lawfully be terminated and whether in the present case, it was so terminated. 33.I shall in due course be referring to the reasoning of both Chu J and the Court of Appeal in relation to these issues when dealing with the matters for determination before this Court. D The issues for determination 34.There are two issues for determination by this Court which can be summarized in the following way:-
35.On 16 June 2011, the Appeal Committee gave leave to appeal to the defendants on these two issues of law. Mr Justice Chan PJ stated the questions for determination as follows:-
E Issue 1: How can the contract of employment between the plaintiff and the defendants be lawfully terminated as far as the School is concerned? 36.In the resolution of this issue, it is necessary to analyze the effect of the relevant contractual provisions contained in the Conditions of Service and the COA. It will also be necessary to refer to the Employment Ordinance, Cap 57. E.1 The Conditions of Service 37.As we have seen, a major amendment was made for the 1996/1997 year when, for the first time, a specified period of employment was set out in the Conditions of Service (see para 10(2) above). The defendants placed great emphasis on this amendment to contend that the plaintiff’s employment was clearly an annual one, which had to be (and was) renewed annually. For the final year (2000/2001) they contended that the period of employment was from 1 September 2000 to 31 August 2001. 38.Chu J accepted this submission, finding that the plaintiff’s contract of employment with the defendants was only for a fixed period of one year’s duration. However, for reasons that will be apparent presently, the learned judge did not hold that the contract of employment was terminated by effluxion of time. She was of the view that the provisions of the Employment Ordinance were decisive to enable the defendants to give one month’s notice to terminate (which they had done by their solicitors’ letter dated 13 July 2001: para 24 above). 39.The Court of Appeal disagreed with the learned judge’s finding that the period of employment was one of fixed duration. Tang Ag CJHC (with whose judgment Cheung JA and Yeung JA agreed) was of the view that the plaintiff’s employment with the defendants was a permanent one to last until he reached retirement age (60 years of age). He did so by relying on clauses 54, 55 and 57 of the COA. Tang Ag CJHC also referred to the Termination Clause in the Conditions of Service, which I now examine. 40.The applicable Conditions of Service for the first academic year of the plaintiff’s employment (1990/1991) contained a Termination Clause in the following terms insofar as termination by the School was concerned (it also contained termination provisions insofar as the teacher giving notice was concerned as well):-
41.Read on its own, this Termination Clause would appear to entitle the School to terminate in two situations:-
42.In respect of the 1991/1992 academic year, some changes were made to the applicable terms of contract (see para 9 above). Notable changes were made to the Termination Clause in the Conditions of Service insofar as termination by the School was concerned (the changes are again underlined for convenience):-
43.The first change was to make a reference to oral and written warnings in the case of unsatisfactory service. The Conditions of Service, however, make no other reference to warnings, but the COA does. In my view, those added words reinforce the conclusion that the provisions in the Conditions of Service regarding termination of contract must be read together with the applicable provisions in the COA. I shall expand on this conclusion below (see para 63 below). 44.The second change was to make provision for another situation (on top of the two set out in para 41 above) in which the School could terminate a teacher’s employment: where it was considered necessary to terminate the employment for a reason other than unsatisfactory service, the same periods of notice would be applicable. On its own, this change at first sight appears to have odd consequences. While ostensibly providing a third situation in which the contract of employment could be terminated by the School, it nevertheless gave the School exactly the same right to terminate as in the situation where there was unsatisfactory service. In other words, it had the consequence of making the unsatisfactory service ground otiose: whether or not there was unsatisfactory service, the School could still terminate as long as the requisite notice was given. Given the odd consequences (as I have described it), one may question the intention behind these changes. I believe it is yet another example of the intention to bring in provisions contained in the COA and again provides further support for the conclusion that it is necessary for the Conditions of Service here to be read alongside the provisions in the COA (see also para 63 below). 45.The third change was to provide that where a teacher had completed over five years of service, every effort should be made to provide a longer period of notice. 46.This amended Termination Clause (with the added words) remained in the Conditions of Service until the 1999/2000 academic year when (again for reasons never explained), the reference to termination for causes other than unsatisfactory service were deleted (that is, the words “Where it is considered necessary to terminate a teacher’s appointment for causes other than unsatisfactory service the fore-going period of notice should apply”). The Termination Clause for the 1999/2000 year therefore read as follows:
47.Regarding the Termination Clause as a whole, in view of her finding that only one month’s notice needed to be given by the defendants to terminate the plaintiff’s employment, Chu J did not find it necessary to make any findings with regard to this (or indeed any other) possible means of terminating the contract. The Court of Appeal, on the other hand, regarded the Termination Clause to be of some importance and the deletion of the words (providing for what I have called the second change: para 44 above), critical. 48.Tang Ag CJHC was of the view that the Termination Clause effectively overrode the terms of the COA, so that unless there was a termination of employment by the defendants under that clause, the plaintiff’s contract would remain in force until he reached the retirement age of 60. The Court of Appeal was of the view that the contract remained in force in this way since, as Tang Ag CJHC noted, there was no finding by the trial judge that the plaintiff’s employment in fact had been terminated under the Termination Clause (whether as a result of unsatisfactory service or a summary dismissal). 49.The Court of Appeal regarded the deletion of the additional words for the 1999/2000 year as critical in demonstrating that the parties thereby intended that the provisions in the COA regarding termination would not be incorporated into their contract. In para 56 of the judgment of the Court of Appeal, Tang Ag CJHC said this:-
50.This conclusion of the Court of Appeal (that the terms of the COA dealing with termination of employment were not incorporated into the contract between the plaintiff and the defendants) is one with which I am unable to agree. It is therefore necessary now to deal with the COA in this regard. E.2 The COA 51.I start by reiterating the importance of this document in the overall context of aided schools in Hong Kong, of which the School was one. Aided schools must comply with the Code in the way they are managed and conducted. 52.I accept, however, that in order for the COA to apply to the contract between the plaintiff and the defendants, its terms must as a matter of the law of contract be incorporated into that contract. In the present case, as we have seen, this does not cause any difficulties: see paras 6 and 7(3)(a) above. The more pertinent inquiry is a common one when terms of a document are incorporated into a contract: how are such terms to be construed when they are seen against the other terms expressly agreed by the parties? 53.Mr Edward Chan SC (for the defendants) referred to two authorities (both based essentially on Adamastos Shipping Co. Ltd. v Anglo-Saxon Petroleum Co. Ltd. [1959] AC 133) for the proposition that where the terms of an incorporated document contain provisions which conflict with the terms of a written document, the terms of the latter are to prevail. This, accordingly to Mr Chan SC, is also supported by the terms of the Other Conditions Clause: see para 7(3) above. As we have seen, that clause begins “Conditions other than what is listed above …”. 54.I accept of course this general principle of construction, providing there is actual inconsistency between clauses. Where the exercise of construction becomes more problematic, however, is where there is no outright conflict between the contractual terms written into a contract and those in the incorporated document. Here, the exercise confronting the Court is one of ascertaining the intention of the parties by looking at the language of the terms agreed by them and all relevant (and permissible) circumstances. To start with, a court should not readily be predisposed to finding inconsistencies between clauses. Instead, the first task of the court ought to be to see whether effect can be given to every clause in an agreement and to see whether clauses can be read together; only if the court cannot do this and there is actual inconsistency should there arise any question of whether a particular clause should prevail over another: see Pagnan SpA v Tradax Ocean Transportation SA [1987] 2 Lloyds Rep 342, at 353(2) (per Dillon LJ); Chilty on Contracts (30th ed) Vol 1 at para 12-078. 55.I now deal with the terms of the COA relating to the termination of a teacher’s contract of employment. In considering this, it is important to place properly in context the relationship between the COA and a contract of employment entered into by the Management Committee of a school and a teacher. Although the COA does not have legislative force, as we have seen, it is a code which prescribes the conditions on which Government aid continues to be provided to an aided school. These conditions regulate aspects of teachers’ employment contracts such as duration and termination (including dismissal). The parties to such a contract are aware of the COA when the contract is made and enter into it with the provisions of COA in mind. This is part of its factual setting. It therefore makes sense to read such a contract as if it was entered into so as to give effect to the provisions of the COA so far as that is possible. As Bingham LJ (as he then was ) observed in Pagnan (referred to in the previous paragraph) at 348(1) : “The task of the Court plainly is to construe the special condition fairly in the context of the contract as a whole and in its factual setting in order to ascertain the true intention of the parties”. 56.The COA contains detailed provisions regarding both the appointment of a teacher and the termination of employment. Clause 46(a) of the Code is in the following terms:-
We have not been provided with Regulations 76, 77 and 78 of the Education Regulations nor any instructions issued by the Director of Education. We are told that they do not feature in the present case. 57.In relation to the specification of a period of employment of a teacher, as we shall see below, the COA does not in my view forbid it as such. In the present case, however, on the basis of the contractual documents, this may not matter, for what is at issue is not whether the contract of employment can or cannot be one of a specified period, but more importantly, how that contract can lawfully be terminated. 58.The plaintiff places much reliance on clauses 54(b) and 55 of the COA to support his submission (which found favour with the Court of Appeal) that the contract was a permanent one:-
It is to be noted that the Appendix 18 of the COA (headed “Teaching Staff’s Contracts in Aided Schools”) repeats the term that a contract “shall not be subject to annual renewal”. 59.For their part, the defendants emphasize the following:-
60.Both sides have respectable arguments in support of their position as to whether or not it is possible to have a contract of employment for a stated period. As will presently become clear, it is not strictly necessary to resolve the differences because it does not matter in the present case, but, as this aspect of the case has been dealt with by both courts below, I feel it incumbent on me to state my own views:-
61.Clause 56, together with Appendices 17 and 18 to which it refers, is the principal provision in the COA dealing with termination of contract. These provisions should be set out in full:-
62.Although the side margin of clause 56 states “Termination of employment”, this clause deals not only with termination but also with renewals of contract (clause 56(d) and (e)) and suspension (clause 56(f)). This clause is a pivotal one in the present case as it deals with how a contract of employment can be terminated, the precise matter to be determined under Issue 1. 63.Before dealing with the meaning of clause 56, I ought first to deal with how this clause can be reconciled with the Termination Clause earlier discussed. It will be recalled the Court of Appeal decided that the Termination Clause in the Conditions of Service somehow overrode the provisions in the COA (the Court of Appeal was addressing specifically only clause 56(c) of the COA) and this was by reason of the deletion of the additional words in the 1999/2000 renewal: see paras 47 to 49 above. An argument in support of this view might also be made on the basis of the “Other Conditions” clause in the Conditions of Service: see para 7(3)(b) above. In my judgment, however, as a matter of construction, this is not the position:-
64.I now come to the effect of clause 56. 65.In my view, this clause in the COA has the following effect:- where the School wishes to terminate the employment of a teacher (whether on probation or after the teacher has served the two year probationary period or in the case of an unqualified teacher), except where the summary dismissal provisions apply, it can only do so for “good and sufficient reasons” in accordance with clause 56(g) and Appendices 17 or 18 (as the case may be). There can, accordingly, as far as the School is concerned, be no termination of a teacher’s contract either by effluxion of time or simply by the giving of a period of notice (these two methods being those submitted to be applicable by the defendants):-
66.Where of course a teacher wishes to terminate, the relevant notice provisions in clause 56 apply. That is not the position in the present case where it was the School which purported to dismiss or terminate the plaintiff’s employment. 67.The effect of the construction I have placed on clause 56 is admittedly to limit the circumstances under which a school can lawfully dismiss or terminate the employment of teachers like the plaintiff. It is entirely consistent with and complements clauses 46(a) and 55 of the COA. And given these limited circumstances, it matters not (as stated in paras 57 and 60 above) whether or not contracts for a stated term are or are not permitted under the terms of the COA because even if they are permitted, there cannot be any termination by effluxion of time (only as far as the school is concerned) unless the terms of Appendix 17 are complied with. This effectively disposes of the defendants’ argument that the contract of employment came to an end in any event by effluxion of time. 68.As to Mr Chan’s alternative argument that even if the contract did not terminate by effluxion of time, it could nevertheless be determinable by giving three months’ notice under clause 56(c) of the COA, this argument is not valid in light of the position that clause 56(c) is not a self-standing provision. It must seen together with clause 56(g): see para 65 above. 69.As his ultimate fallback position, Mr Chan argued that whatever the effect of the COA, its terms were to be read subject to and could not override the express terms of the written contract between the parties: see paras 7(3)(b) and 53 above. He principally referred to clause 54(b) and 55 of the COA to say that, whatever their effect, the period of employment clause took precedence. The same argument could be made also in relation to clause 56 and Appendix 17 of the COA. But, in my view, this is not a valid argument. 70.There is no conflict between the period of employment clause and clause 56 (and Appendix 17): the former clause and the rest of the Conditions of Service are silent on renewals, whereas clause 56(g) and Appendix 17, as I have already analyzed, do specifically deal with renewals (or, more accurately, non-renewals). This is also consistent with the relevant Termination Clause (see para 46 above) which refers only to unsatisfactory service as the reason for termination of employment (apart, of course, from the summary dismissal provision). 71.I am fully aware that the effect of the above construction of the employment contract is to provide a substantial measure of protection to the plaintiff and other teachers in his position. This appears to me, however, to be the policy behind the COA: teachers are afforded a sizeable measure of security in their employment. I am of course referring to the position of full time teachers: the position of supply teachers and temporary teachers hired on a monthly basis are in a different position: see clauses 29 and 30 of the COA. 72.By reason of the foregoing, I am of the view that under the contract between the plaintiff and the defendants, unless the defendants can show that clause 56(g) of the COA is applicable - and this means that it will have to be shown that the requirements of Appendix 17 have been fulfilled – the plaintiff’s dismissal from the defendants’ employment would have been unfair and in breach of contract. The defendants cannot just rely on the contract being terminated either by effluxion of time or by the giving of three months’ notice under clause 56(c) of the COA. This is of course subject to the defendants’ argument based on the Employment Ordinance, to which I now turn. E.3 The Employment Ordinance 73.Sections 5(1) and (2) and 6(1) and (2) of the Ordinance provide as follows:
74.The defendants’ submissions were concisely put by Mr Chan:-
75.Chu J held that s 6(2)(a) of the Ordinance applied in the present case. She agreed with the defendants’ submission that the contract between the plaintiff and the defendants for the final year was not evidenced in writing. She also held that the terms of the COA were not incorporated into the contract except insofar as they set out only the plaintiff’s obligations and no more: see para 14 above. The consequence of this narrow view of the applicability of the COA meant that the provisions contained in clause 56 of the COA regarding the requisite period of notice were therefore not incorporated, meaning then that the contract did not contain any provision for the length of notice to be given. As the defendants (through the letter dated 13 July 2001from their solicitors) had given one month’s notice, the learned judge concluded that the contract had been lawfully terminated under the Employment Ordinance. 76.The Court of Appeal did not specifically address the position under the Ordinance. However, it is tolerably clear the Court of Appeal must have held that in view of the applicability of the Termination Clause (see para 48 above), the contract between the parties did make provision for the termination of contract. Accordingly, s 6(2)(a) would have no application. And, as there had been no findings based on the Termination Clause (there were no findings in relation to either unsatisfactory service or summary dismissal: para 48 above), presumably the Court of Appeal would have found s 6(2)(b) of no application as well. 77.In my view, this aspect of the case can be quickly disposed of:-
E.4 Conclusion on Issue 1 78.The Employment Ordinance not having any application, the issue of lawful determination of the contract of employment must therefore be decided by looking at the relevant terms of the contract between the plaintiff and the defendants. Here, I would repeat my view that the contract of employment could only be terminated with reference to the procedures in clause 56(g) and Appendix 17 of the COA (unless the summary dismissal provisions applied). It is to be noted that in the present case, that is what the defendants in fact purported to do. In allowing the appeal, the Court of Appeal held that there had been a wrongful termination and ordered that the case be remitted to the trial judge for an assessment of damages. The basis for the Court of Appeal finding that there had been a wrongful termination was that it was of the view that the employment of the plaintiff was a permanent one (lasting until he reached the age of 60). The Court of Appeal noted in para 46 of Tang Ag CJHC’s judgment that there had been no finding by the trial judge as to whether or not the contract of employment had been lawfully terminated by the defendants, whether as a result of the unsatisfactory service or summary dismissal. 79.In view of the conclusion I have reached – subject to the determination of Issue 2 – the proper order to make would be to remit the matter to the trial judge for a determination, in the light of this judgment:-
80.Before leaving this Issue, I should just make one final observation. The contractual terms this Court has had to construe were poorly drafted. Both courts below also had difficulties in the exercise of construction. Even in a poorly drafted contract, the Court must construe every relevant term and try to ascertain the true intention of the parties. The reconciling of seemingly contradictory terms will often be required, but the object of the exercise is to ascertain the probable and sensible intention of the parties, given the context of their relationship. In doing so, a court would be justified, in a poorly drafted contract, not to pay too much regard to semantic niceties: see Mitsui Construction Co. Ltd. v Attorney General [1987] HKLR 1076, at 1082G (per Lord Bridge of Harwich). 81.I now turn to Issue 2. F Issue 2: Does the prosecution of the present action constitute an abuse of the process of the Court? 82.The abuse that is known as the Henderson v Henderson abuse (or res judicata in the wider sense – the nomenclature is not important) is derived from the case of that name. It has been developed and explained by the House of Lords in Johnson v Gore Wood & Co. (a firm) [2002] 2AC 1, by the Judicial Committee of the Privy Council in Yat Tung Investment Co. Ltd. v Dao Heng Bank and Brisbane City Council v Attorney General for Queensland [1979] A411, by the English Court of Appeal in Bradford and Bingley Building Society v Seddon [1999] 1WLR 1482 and by our Court of Appeal in Ngai Few Fung v Cheung Kwai Heung [2008] 2HKC 111 and Chiang Lily v Secretary for Justice [2009] 6HKC 234. The essence of the doctrine is that a party ought generally not be permitted to raise in subsequent proceedings matters which that party could and should have raised in earlier proceedings. 83.For reasons that will become evident presently, it is unnecessary in order to resolve this part of the appeal to go into the precise ambit of the principles regarding this form of abuse, although for my part, I would say that the present state of the law is reflected by the decision of the House of Lords in Johnson v Gore Wood and of the Court of Appeal in Chiang Lily v Secretary for Justice. For present purposes, it is sufficient just to refer to the following facets of the doctrine:-
84.The jurisdiction to prevent claims being litigated in proceedings is almost invariably exercisable by an application to strike out. It is true that an application to strike out can be made at any time: see RSC O.18 r.19(1). However, where an application is made to strike out proceedings or any part thereof on the basis that they should not be permitted to go to trial, it is obvious that such an application should be made at the earliest possible opportunity, before the parties and the court’s resources are potentially wasted. Obviously, where a claim or defence is unsustainable as a matter of law, the timing of the application to strike out is less critical, but where a discretion (or something akin to it) exists as to whether or not a set of proceedings or any part thereof should be permitted to continue, time is important. In this latter situation, where proceedings may constitute an abuse on the basis that it would be vexatious for a court to try the case, the sooner this is dealt with the better; otherwise, the very evils sought to be avoided (the wastage of time and resources causing vexation or harassment of the other party) would continue to accumulate. The present case provides a glaring example of this. 85.In the speeches of Lord Bingham of Cornhill and Lord Millett in Johnson v Gore Wood, references were made to the importance of expedition in such a situation: at 34C-D and 61C-E. A delay in raising this point of abuse gives rise to a reasonable inference either that the relevant defendant is not really vexed at all by the second set of proceedings or has acquiesced in it. It is certainly not acceptable from the point of view of the administration of justice. 86.The trial judge’s decision to dismiss the plaintiff’s claim on this basis was reversed by the Court of Appeal. A number of reasons were articulated in support of this conclusion, but I need only refer to one: the delay on the defendants’ part to raise the point of abuse. It was not until the trial itself that the point was raised by the defendants that the action ought to be dismissed on the basis of abuse. An argument was made along the lines that the defendants had expressly in their pleadings reserved their position in this regard. Reference was made to paras 34 to 35 of the Re-Re-Amended-Defence. It is far from apparent that such a reservation was actually made in those paragraphs of the pleading but it matters not. Even if there was such a reservation, this did not justify the defendants waiting until such a late stage – it could hardly have been later – to make an application to strike out. 87.By the time Chu J was invited to deal with the issue, the parties were already fully prepared for trial on each of the issues raised in the action. In other words, there was an irony here that presented itself before the court: Chu J was asked to strike out the proceedings on the basis that the plaintiff ought not to be permitted to go to trial when at that stage, both parties (not to mention the Judge) had fully prepared themselves for a trial. By then, discovery had taken place, witness statements had been exchanged (including those of expert witnesses) and all other preparations on the assumption that a trial would take place, had been made. And yet, the judge was persuaded not only to deal with the strike out application but also to embark on the trial itself. In my view, the Judge ought to have refused to deal with the abuse arguments and simply have dealt with the substantive issues in the action only. It was at that stage far too late to mount a strike out application on the basis of the abuse alleged. I reiterate the irony of an application to strike out to prevent issues being raised in subsequent proceedings which could and should have been made in earlier proceedings when in those very subsequent proceedings, both parties (and in particular, the party applying to strike out) were fully prepared to embark on a trial of those issues. This is not a situation where a late strike out application is made on the basis that no reasonable cause of action or defence existed. In that situation, a court may well find it appropriate to deal with the application: see, for example, Tang Woung Shiu v Tang Kun Yeung [2002] 3 HKLRD 627. 88.The Court of Appeal was of the view that it was far too late for the defendants to apply to strike out at the trial stage and that the Judge had failed to take into account this important factor. With respect, whatever were otherwise the merits of the application to strike out, I agree that the Court of Appeal was entitled to reverse the Judge’s finding of abuse on this ground alone. This then provides the answer to the second issue for which leave was given by the Appeal Committee to appeal to this Court. 89.Before leaving this issue, I also ought to mention that at the hearing before us, Mr Chan sought to introduce an argument along the lines that there was also an issue estoppel following the settlement of the First Proceedings. Whatever the merits of this argument, this was, until it was first raised before us, not an issue that had been raised before either the Court of First Instance or the Court of Appeal. Nor had it featured in the parties’ respective Cases. Leave to appeal to this Court had not been given for this issue either. It was not pleaded in the defence (an estoppel must be pleaded: see Hong Kong Civil Procedure 2012 at para 18/8/11). This was not an argument that this Court was prepared to entertain. G. Outcome of appeal 90.For the above reasons, I would allow the appeal only to the extent as indicated in para 79 above in terms of what should be remitted to the trial judge. 91.Nevertheless, as far costs are concerned, I am of the view that although the appeal has been allowed in part, the plaintiff has largely been successful in this appeal. While recognizing that the defendants have had to appeal to this Court, for my part, I would make an order nisi that the defendants pay to the plaintiff 75% of his costs, such costs to be taxed if not agreed. If any party wishes to have a different order for costs, written submissions should be served on the other party or parties and lodged with the Court within 14 days of the handing down of this judgment, with liberty on the other party or parties to lodge written submissions within 14 days thereafter. In the absence of such written submissions, the order nisi will stand absolute at the expiry of the time limited for these submissions. Mr Justice Bokhary PJ: 92.I agree with the judgment of the Chief Justice and the observations of Mr Justice Chan PJ. Mr Justice Chan PJ: 93.I agree with the judgment of the Chief Justice and the orders proposed by him for the disposal of this appeal. I would just like to make a few observations. 94.Teaching is an honourable vocation and teachers play a vital role in the education and upbringing of our younger generations. There are many who consider that it is important to provide greater protection for teachers in their employment in order to attract high quality people to join the profession. This concern is apparently shared by the education authority and is, to some extent, reflected in the relevant provisions of the Code of Aid as discussed in this appeal. 95.The Code is a somewhat unique document. It prescribes the rules and conditions in accordance with which the Government promotes education by means of grants to aided schools and such schools are to be managed and conducted in accordance with the Education Ordinance, Cap 279, its subsidiary legislation and this Code. In s 3 of the Ordinance, the Code is defined as a code issued by the Permanent Secretary for Education, under the terms of which the Government gives subsidies to certain schools. However, it does not have any legislative status since it was not issued under the rule-making power as provided in the Ordinance. But any school which chooses to receive government subsidy is obliged to abide by the provisions in the Code, including those which touch on the relationship between the school and its teachers, such as the protection offered by the Code. 96.The Code is not satisfactorily drafted, to say the least. It was first issued in 1984; it contains over 120 pages (including appendices) and has been revised many times since then. It would also appear that changes had been made to the Code in a piecemeal manner, giving rise to inherent inconsistencies or even internal conflicts and thus creating difficulties in the understanding and construction of this document. This state of affairs has been subject to criticisms by the lower courts in this case and in the cases mentioned above. In my view, it is high time to have an overall review of the Code for the better guidance to aided schools. This is also desirable if it is the intended policy of the education authority to afford greater protection to teachers in aided schools. 97.I would share the Judge’s feelings against the conduct of the respondent. In dismissing the respondent’s claim on the ground of abuse, the trial judge obviously disapproved of the manner in which he brought these proceedings against the School, not only what he had said but especially what he had deliberately refrained from revealing to the Labour Tribunal and the School. After his dismissal in 2001, he had clearly obtained legal advice from solicitors who then entered into correspondence with the Education Department alleging wrongful termination by the School. Although the first claim (which was lodged a year after his dismissal) was only for arrears of wages, both the first and second claims were based on the same set of facts and the same cause of action; the same issues were raised and the same provisions of the Code were relied on. The respondent was also well aware of the basis on which the School chose to settle his first claim and yet he chose to keep it to himself what he was already thinking of, i.e., instituting a second action against the School. In my view, the judge was right in criticizing such conduct. However, I agree with the Chief Justice that in the present case, the action had already proceeded to trial and it was far too late to strike out the respondent’s claim on the ground of abuse. Mr Justice Ribeiro PJ: 98.I agree with the judgment of the Chief Justice. Sir Anthony Mason NPJ: 99.I agree with the judgment of the Chief Justice. Chief Justice Ma: 100.The appeal is accordingly allowed to the extent stated in paras 79 and 90 above. The Court makes an order in accordance with the order set out in para 79, namely, that the matter be remitted to the trial judge for a determination, in the light of this judgment:-
As to costs, the Court makes an order nisi in terms as stated in para 91 above.
Mr Edward Chan, SC and Mr Lee Tung-ming, instructed by ONC Lawyers for the 1st defendants (appellants) Mr Erik Shum, instructed by Ho, Tse, Wai & Partners for the plaintiff (respondent) |
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