XCHRX CABLE & WIRELESS (HONG KONG) LTD. STAFF ASSOCIATION v. HONG KONG TELECOM INTERNATIONAL LTD.

1991, H.C.A. No. A7389

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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R E A S O N  F O R  D E C I S I O N

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1. The Defendant took out 2 summonses, one for the amendment of it's Defence and one to strike out the Statement of Claim under Ord.18 r.19 of the Rules of the Supreme Court. The summons to strike out the Statement of Claim was taken out on 5th October 1996 while the summons to amend Defence was taken out on 7th May 1997.

2. The Plaintiff claims against the Defendant for various declarations and injunctions arising out of a collective agreement ("Procedural Agreement") signed between the Plaintiff and the Defendant.

3. The Defendant in its original Defence admits paras. 1 to 6 of the Statement of Claim which means the Defendant admits the Procedural Agreement is "on a proper construction of the contract, valid and binding at all material times as between the Plaintiff and the Defendant".

4. The Defendant by its summons applied to amend para. 1 of its Defence by stating that the Procedural Agreement was valid and binding in honour only but was unenforceable in law and was not intended to create legal relations between the parties.

5. Mr. Hunsworth in his affidavit in support of his summons deposed that "he took instructions from the Defendant in 1991 with a view to instructing counsel to settle a defence to the Statement of Claim. Those instructions were taken from the then group legal adviser of the Defendant, Mr. Rick Tang". He went on to refer to the 2nd affidavit of the late Malcolm Brown filed on 7th November 1996 who deposed that the Defendant considers that the Procedural Agreement is valid to the extent that it was properly executed and binding in honour on both parties and that the Defendant never conceded that the agreement is legally enforceable.

6. On the plain construction of para. 6 of the Statement of Claim it is clear and there could have been no mistake that it can only be construed as the Defendant agreed it was a legally binding contract. However I allow the amendment so as to enable all issues to be raised and tried.

7. Mr. Huggins Q.C. for the Defendant relied heavily on Ford Motor Company Ltd. v. AEF [1969] 2QB 303 to say that in the last 30 years in U.K. collective agreements are not intended to create legal relations. He also cited Hong Kong Airline Officers Association v. Cathay Pacific Airways Ltd. [1994] 2 HKLR 361 to support his argument.

8. Mr. Huggins Q.C. had thoroughly dissected Ford's case and submitted that applying the approach of the court in Ford's case to the facts of the present case the Procedural Agreement could not have been intended to have been legally enforceable.

9. After Ford's case, by the Industrial Relations Act 1971 S.34(2) collective agreements in writing with the exception of the part in the agreement which stated expressly not to be legally enforceable were to be conclusively presumed to have been intended by the parties to be a legally enforceable contract. This legislation however was reversed by the Trade Union and Labour Relations Act 1974 S.18. In view of those 2 Acts of Parliament Mr. Huggins argued that the Common Law position as it appears in Fords's case has remained intact for the purpose of Hong Kong since 1969.

10. I do not agree. Having gone carefully into the judgment of Lane J. (as he then was) I do not find the circumstances and the climate of opinion voiced in U.K. in the 1960 similar to or applicable to H.K. After hearing evidence Lane J. at p.330 said "The conclusion which I have reached is this: it is necessarily a preliminary view as this of course is not the hearing of the action proper. If one applies the subjective test and asks what the intentions of the various parties were, the answer is that so far as they had any express intentions they were certainly not to make the agreement enforceable in law. If one applies the objective test and asks what intention must be implied from all the circumstances of the case, the answer is the same. The fact that the agreements prima facie deal with commercial relationships is outweighed by the other considerations, by the wording of the agreements, by the nature of the agreements and by the climate of opinion voiced and evidenced by the extra-judicial authorities."

11. The extra-judicial authorities Lane J. considered were (1) The Modern Law Review, (2) Report of the Royal Commission on Trade Unions and Suppliers' Association 1965-1968, (3) the evidence before the Royal Commission by the Confederation of British Industry, Trade Union Congress and others, (4) written evidence of the Ministry of Labour Commission.

12. He referred to 2 statements from the written evidence of the Ministry of Labour. The one at p.76 is as follows:-

"(The common opinion is that a contract between a single employer and a trade union could also not be enforced by the courts though this is not specified by statute)"

13. The other at p.80 para. 26 is as follows:-

"As has been pointed out .... the contracts entered into between employers' associations and trade unions (and probably the contracts entered into between single employers and trade unions) are not legally enforceable in this country. This is in striking contrast to the situation in most other countries".

14. His objective test is therefore in part based on the climate of opinion voiced by the extra-judicial authorities.

15. The situation and climate of opinion in UK at that time is therefore unique as the Ministry of Labour had on p.80, para 26 pointed out that "This is in striking contrast to the situation in most other countries".

16. Can we therefore rely on Ford's judgment to say categorically that collective agreements are not enforceable in law in H.K.? I do not think so. I agree entirely with Jerome Chan J. in HK Airline Officers Association v. Cathay Pacific Airways Ltd. [1994] 2 HKLR 367 at 373 in which he said "I have no hesitation to hold that the courts in H.K. should only look at the circumstances prevailing locally and not abroad in another domain having quite different social, cultural, economic and political environment from ours. The fact that the Common Law of H.K. is founded on English Common Law is of no assistance here."

17. In Cathay's case Jerome Chan J. concluded that the agreement under consideration was not meant to be legally enforceable as the agreement recited that "subject to profession advice it is envisaged that the new company and CPA will sign a contract which will cover ..." It is evident from the recital that the agreement did not intend to bind the Defendant. So that case is of little assistance to the present case.

18. Whether the agreement in the present case is legally enforceable depends on the intention of the parties. The intention of the parties is to be gathered from the document itself and from the surrounding circumstances including the climate of opinion prevailing in H.K. What was the intention of the Defendant? The late Malcolm Brown in para. 11 of his 2nd affidavit stated that "the Defendant has never explicitly accepted that the Procedural Agreement is legally enforceable in a court of law". This is a bare statement. He did not give instructions to the Defendant's solicitors. It was Rick Tang from whom Mr. Hunsworth took instructions. Tang was then the group legal adviser of the Defendant. Had it been the stand of the Defendant that the Procedural Agreement was binding in honour only then he would have given explicit instructions to that effect. This is not a matter which can be resolved in interlocutory proceedings.

19. Let us then look at the contents of the agreement. From the Procedural Agreement, it is stated that the purpose of the agreement is "to avoid and settle disputes, and they agree that any differences arising between them shall (my emphasis) be dealt with in accordance with Arts. 5, 6 and 10". Arts. 5 and 6 dealt with procedure for collective negotiation and grievance procedure. Art. 10 states the duration of the agreement.

20. Mr. Huggins referred to Arts. 1, 2.2, 2.3, 2.8, 5.4 and 6.2 of the agreement and contended that the language is vague, uncertain and aspirational. I am of the view that most of these clauses are peripheral.

21. From the document itself, was it the intention of the parties that it is intended to be legally binding? It is a matter which has to be dealt with at the trial and not in interlocutory proceedings.

22. In E (A minor) v. Dorset County Council [1994] 3 WLR 853 at 865 per Sir Thomas Bingham MR "It is clear that a Statement of Claim should not be struck out under Rules of Supreme Court Ord.18 r.19 as disclosing no reasonable cause of action save in clear and obvious cases where the legal basis of the claim is unarguable or almost incontestably bad."

23. This is followed in Yue Xiu Finance Co. Ltd. and another v. Dermor Agnew and others [1996] HKLR 137. Litton VP at p.141 stated "It must be emphasized that the judge was concerned in the court below only with an application to strike out the Plaintiff's claim under Ord.18 r.19(1)(a) of the Rules of Supreme Court. The precise nature of the relationship between the parties has not been ascertained by evidence. What the Defendants were seeking to do, by their summons, was in effect to drive the Plaintiff from the judgement seat. This is a drastic remedy and it follows that no court should give effect to it unless it is satisfied that the legal basis of the claim is unarguable or almost incontestably bad and as Sir Thomas Bingham MR remarked in E (A minor) v. Dorset County Council [1994] 3 WLR 853 at 865, where legal viability of the cause of action is sensitive to the facts, an order to strike out should not be made."

24. For reasons above I cannot say that the Plaintiff's claim is unarguable or almost incontestably bad. The Defendant's application to strike out must therefore fail.

Delay

25. The prejudice to the Defendant according to Malcolm Brown is the difficulty in taking proof of evidence from its employees. It is not the case that the intended witnesses cannot be called. According to Brown, five of the seven intended witnesses have either retired or resigned, and two had been transferred. It is not the case that they are not in a position to give evidence.

26. In any event not much evidence need be adduced. In Prenn v. Simmonds [1991] 1 WLR 1381 it was held that "in construing a written agreement evidence of negotiations or of the parties' intentions ought not to be received by the court and that the evidence should be restricted to evidence of the factual background known to the Plaintiffs at or before the date of the contract including evidence of the genesis and objectively the 'aim' of the transaction". The only evidence admissible would be related to the surrounding circumstances. Such evidence do not depend upon the witnesses' recollection of fine points of detail. See also Trill v. Sacber [1993] 1 WLR 1379 at 1392-1393.

27. For those reasons, I do not see how the Defendant can be seriously prejudiced as to deprive it of a fair trial. The Defendant's application to strike out on this ground must also fail.

28. In the premises the Defendant's application to strike out the Plaintiff's claim is dismissed. Order nisi that the costs of this application be the Plaintiff's. Certificate for 2 counsel.