CHONG CHENG LIN COURTNEY v. CATHAY PACIFIC AIRWAYS LTD

CACV 7/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 7 OF 2010

(ON APPEAL FROM HCA NO 898 of 2007)

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J U D G M E N T

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Hon Tang, Acting CJHC:

1.  I have had the benefit of reading Andrew Cheung J’s judgment in draft. I respectfully agree with it and have nothing to add.

Hon Yuen JA:

2.  I have had the benefit of reading Hon Andrew Cheung J’s judgment and agree with it.

Hon Andrew Cheung J:

Facts

3.  This is an appeal from a judgment given by Chung J on 22 December 2009 after trial of the action.

4.  The judge gave judgment for the plaintiff against her former employer, Cathay Pacific, in respect of her claims under a certain “retiree travel benefit” scheme (RTB).  Cathay appeals.

5.  The plaintiff was born in 1956.  On 5 March 1979, she joined Cathay Pacific as a cabin attendant.  She was promoted through the ranks to chief purser.  On 25 May 1993, Cathay terminated her employment by payment of one month’s salary in lieu of notice.  She was only 36 and had not yet reached her normal retirement age of 40 when termination took place.

6.  When the plaintiff first joined the defendant, she signed a set of Conditions of Service as terms of her employment contract. The Conditions of Service were Cathay’s standard conditions of service for cabin attendants.  The version signed by the plaintiff was dated 13 February 1979.

7.  A revised set of Conditions of Service came into being on 1 January 1986.  It is common ground that the 1986 version replaced the 1979 version as containing the, or, some of the, terms and conditions of the plaintiff’s contract of employment.

8.  The 1986 Conditions of Service, like the 1979 version, covered various aspects of the employment relationship.  Amongst other things, clauses 25 to 28 dealt with “resignation and retirement”, “retirement grants”, “discipline” and “dismissal”.  Given the importance of these specific terms in this appeal, it is helpful to set out these clauses here:

“25. Resignation and Retirement

(A) Cabin crew wishing to resign will be required to give one month’s notice in writing or one month’s pay in lieu of notice to the Company. When a cabin crew member is required to resign or retire by the Company, 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.

…

(C) Normal retirement for cabin crew shall be :-

i) on attainment of age 55 for male cabin crew

and

ii) on attainment of age 40 for female cabin crew subject to the completion of 10 years’ service.

…

26. Retirement Grants

(A) Cabin crew will be entitled to Retirement Grants on the following scale:-

Number of Completed Years of Service	Percentage of Final Monthly Basic Salary for each Completed Year of Service
	Cessation of Service	Retirement on Medical Grounds	Normal Retirement
1	-	180%	-
2	-	180%	-
3 … 20 & over	50% 180%	180% 180%	- 180%

(D) Retirement on Medical Grounds means retirement due to ill-health (certified by the Company’s Medical Examiner) caused through no fault or indiscretion of his/her own and is accepted by the Company.

…

27. Discipline

"No cabin crew member may be absent from duty without leave. Cabin crew must perform to the best of his/her ability the duties assigned.

Any cabin crew member who neglects or fails to perform his/her duties to the satisfaction of the Company, or who is guilty of unsatisfactory conduct including smuggling, embezzlement, malfeasance, insubordination, illicit trading, betrayal of trust or confidence, will be liable to dismissal without notice or benefit, and the Company reserves the right to take whatever action against him/her, they may deem fit and proper.

28. Dismissal

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.”

9.  It should be pointed out immediately that neither the 1979 nor the 1986 version of the Conditions of Service mentioned RTB, the subject matter of dispute between the parties.

10.  Rather, RTB was first mentioned in a “Passenger Tariff Manual” issued by the defendant in June 1989 to its traffic and sales staff for the purposes of handling ticketing.  The Manual was described in its foreword as a “guide” to the relevant staff.  The relevant part of the Manual provided:

“J. RETIREMENT TRAVEL CONCESSION

1. CX retired staff and their spouses will be eligible for the following rebates:

…

2. The following staff will be eligible:

…

d. All male cabin attendants who have completed 10 or more years of service and have reached the age of 55 and all female cabin attendants who have completed 10 or more years’ service and have reached the age of 40. Male cabin attendants, who qualify by service but not by age, will become eligible upon reaching the age of 55 and female cabin attendants, who qualify by service but not by age, will become eligible upon reaching the age of 40.

…”

11.  The Manual was not issued to cabin attendants. However, unlike the Manual, the “Staff Services Booklet”, issued by the defendant in March 1990, was specifically prepared for the consumption of cabin attendants.  The Booklet dealt with three subject matters, that is to say, housing, medical and travel.

12.  So far as RTB was concerned, the Booklet was very brief, and quite plainly proceeded on the assumption that cabin attendants knew what RTB was.  For all it said about RTB was:

“J. Retirement Travel

1. Dependants are eligible for half the number of rebated tickets for the retired staff member: i.e. 3 ID90 Sublo trips per year and 3 ID75 Sublo trips per year. ID50 Nosub travel is unrestricted.”

13.  No such ambiguity arose in relation to the “Staff Benefits Handbook” for cabin attendants issued by Cathay in 1991 to replace the Booklet.  The Handbook dealt with the same subject matters as the Booklet, namely, housing, medical and travel.  It dealt with RTB in the following terms:

“ CONCESSION TRAVEL – ONLINE

Cabin Attendants

Travel concessions for staff and eligible dependants are for pleasure and recreational purposes only. It is not to be used for business/commercial purposes. The Company reserves the right to reject any application if improper use of travel concessions is suspected.

Eligibility

…

6. Retired staff and their spouses and children under the age of 23 are 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.

a. All male cabin attendants who have completed 10 or more years of service and have reached the age of 55. Those who qualify by service but not by age, will become eligible upon reaching the age of 55.

b. All male cabin attendants who have completed 20 years of service and have reached the age of 50.

c. All male cabin attendants who have completed 25 years of service, regardless of age.

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

e. All female cabin attendants who qualify by service but not by age, will become eligible upon reaching the age of 40.”

14.  There was another Staff Benefits Handbook issued by Cathay in August 1992.  But it is common ground that no material change was made to the RTB provisions.  Yet another Handbook was issued by Cathay in July 1993, but by then the plaintiff’s employment had already been terminated.  For all practical purposes, one is concerned with the RTB provisions extracted above.

Contentions of parties

15.  It is and was the plaintiff’s case that as a former cabin attendant who had served Cathay for more than 10 years, and who had reached the age of 40, she was (and is) entitled to benefits under the RTB.  That was why in 1998, she applied for and was initially issued with a RTB card thus entitling her to RTB benefits.  The RTB card, issued to the plaintiff on 1 December 1998, was subsequently said by the defendant to have been issued to the plaintiff “by mistake”, and it was withdrawn accordingly.  The defendant’s case was and is that as a dismissed cabin attendant, the plaintiff is not eligible for RTB.

16.  In any event, the defendant maintains that the relevant RTB provisions, which were not contained in the 1979 or 1986 Conditions of Service, never formed part of the contract of employment between the plaintiff and the defendant, and accordingly had no contractual force.  They simply represented discretionary benefits which Cathay was quite entitled to withhold from the plaintiff, a dismissed employee.

17.  Further, through Mr Ashley Burns SC, Cathay argues that the RTB provisions, which were first contained in the 1991 Handbook, could not have become terms of the contract of employment made more than 11 years ago by way of variation of the original contract, for want of adequate consideration.

18.  These contentions therefore form Cathay’s main grounds of appeal on liability against the judgment below.  The judge, it should be added, has found that the RTB provisions have been “incorporated” into the contract of employment and therefore have contractual force, and that on their proper construction, they apply to a dismissed employee like the plaintiff.

19.  As regards relief, the defendant challenges the finding of the judge that the plaintiff has suffered loss and damage, calculated by reference to the difference in airfares which she and her parents have paid resulting from the withdrawal of the RTB card by Cathay.  The judge has awarded the plaintiff damages in the sum of $149,543, and the defendant challenges that award.  On the other hand, the judge has also granted the plaintiff relief in relation to her RTB entitlement, against which relief the defendant has not mounted any independent challenge.

20.  An argument based on estoppel was run by the plaintiff at trial.  However, as the judge found in favour of the plaintiff in terms of the “incorporation” of the RTB provisions into the contract of employment, there was no need to resort to estoppel.  I will return to this question later on.

Have the RTB provisions become part of the contract?

21.  The first issue raised in this appeal is whether the RTB provisions have become part of the contract of employment between the parties.

22.  Although the plaintiff has put forward her case in different ways and the judge has dealt with the matter on alternative footings (see paras 21 and 22 of the judgment), at the hearing of the appeal, Mr Martin Lee SC for the plaintiff has focused his argument on the RTB provisions in the Handbook as having contractual force.

23.  Yet it must be remembered that the RTB provisions, contained in the 1991 Handbook, were, by definition, non-existent at the time when the contract of employment was entered into in 1979.  By the nature of things, the RTB provisions contained in the 1991 Handbook could only have become part of the contract of employment after the publication of the Handbook.

24.  The Court, therefore, is not concerned with the relevant position between the parties between 1979 and 1991 before the Handbook was published.  In other words, whether between 1979 and 1991 the plaintiff had any RTB entitlement, whether contractually or as a matter of discretion, is, of itself, quite irrelevant to the issues involved in the present appeal.  As presented in the appeal, the plaintiff sues on the RTB provisions contained in the 1991 Handbook which, she says, have become part of the contract of employment.

A case of variation, not “incorporation”

25.  For this reason, it is quite unnecessary to consider the cases cited by Mr Burns on how documents may be expressly or impliedly “incorporated” into a contract: Alexander v Standard Telephones & Cables Ltd (No 2) [1991] IRLR 286; Wandsworth London Borough Council v D’Silva [1998] IRLR 193.  The simple reason is that the principles enunciated and applied in these cases concern primarily the incorporation of pre-existing or contemporaneous documents into a contract when it is formed.  They deal with how, for instance, parties may, when entering into a contract of employment, incorporate into the contract, by means of a “bridging term”[1] expressly contained in or implied into the signed contract, terms and provisions contained in some documents, other than the written contract that they are signing.  Those principles would be helpful in determining whether a pre-existing handbook, or some of the provisions contained therein, form part of the contractual terms governing an employment relationship, by express or implied “incorporation”.  Of course, if the signed contractual document contains a “standing” bridging term that enables a future document or some provisions contained therein, as and when the document shall come into being, to be incorporated, the same principles governing incorporation of pre-existing or contemporaneous documents should, as a matter of principle, apply.

26.  That sort of situation is to be distinguished from the situation that the Court has to deal with in the present case. According to the way the plaintiff runs her case on appeal, only the RTB provisions contained in the 1991 Handbook are relied on.  Nothing pre-existing or contemporaneous to the contract of employment made in 1979 is resorted to.  Nor is it suggested that there is a standing bridging term of the type described above in the Conditions of Service to incorporate the RTB provisions in the subsequent Handbook.  In those circumstances, one is not really dealing with the type of “incorporation” situation that cases such as Alexander were concerned with.

27.  Rather, one is, in strict legal analysis, concerned with a case of variation, that is to say, a case of subsequent variation by agreement of the original terms of contract.

28.  In the present context, the difference between incorporation (understood in the meaning described) and variation is at least two-fold.  First, with incorporation, one is primarily concerned with issues such as whether there is a bridging term in the signed contractual document to incorporate another document or some provisions contained therein as part of the contract; the proper construction of the contractual document actually signed[2]; and whether the character of the document (or the relevant part thereof) to be incorporated is apt to form part of the individual contract in question, in order to determine whether the parties have, expressly or by implication, incorporated the document or some part thereof into the contract.  With variation, one examines all relevant circumstances, including, but not limited to, the character of the new terms or the document containing the new terms, to determine whether the parties have agreed to vary the existing terms of contract by those new terms. 

29.  Secondly, in a case of incorporation, consideration is not in issue.  The necessary consideration is supplied by the consideration for entering into the contract.  However, with variation, one cannot rely on past consideration to supply the necessary consideration for the variation.

“Custom and practice” not in issue

30.  The above discussion also disposes of another false issue that has featured in the appeal, namely, whether the RTB provisions contained in the 1991 Handbook have been “incorporated” into the contract by means of “custom and practice” within Cathay Pacific.  This is a non-issue because the plaintiff’s case, as presented in the appeal, is that the RTB provisions themselves formed part of the contract of employment between the parties.  It is not, or is no longer, her case that by some pre-existing custom and practice, terms governing RTB were incorporated into the contract of employment when it was made in 1979[3], and that those RTB terms were subsequently evidenced by the RTB provisions contained in the much later 1991 Handbook.  Nor is it the plaintiff’s present case that some custom and practice relating to RTB had come into being after 1979 and pursuant to that custom and practice, some RTB terms had become part of the contract of employment, and they were subsequently evidenced by the RTB provisions in the 1991 Handbook.

31.  Rather, the plaintiff’s case, as eventually argued, is that the RTB provisions in the 1991 Handbook have themselves become contractual terms and formed part of the contract of employment.

32.  For these reasons, the submissions on how terms may be incorporated into a contract, or may become part of a contract after it has been made, by means of custom and practice, are not relevant to the issues before the Court.

Agreement to vary?

33.  What is at issue is, as explained, whether the RTB provisions in the 1991 Handbook have become part of the contract of employment, by means of variation.  This, it should be pointed out, was not exactly how the matter was pleaded by the plaintiff, although paragraph 2(d) of the re-re-amended statement of claim did assert that the RTB provisions in the 1991 Handbook formed part of the contract of employment.  Nor was variation dealt with as such by the judge, although he did go to the question of past consideration. However, Cathay has taken no pleading objection before this Court and indeed it is fair to say that Mr Burns has come prepared to argue on the point and has done so with admirable skill.  In those circumstances, it seems to me that this appeal should be decided according to the issues actually argued.

34.  Variation, in the present context, raises two issues.  First, whether the parties agreed to vary the contract of employment by the RTB provisions in the Handbook.  Secondly, assuming that the answer is in the affirmative, whether there was adequate consideration to support the agreement to vary.

35.  Did the parties agree to vary the contract of employment by the RTB provisions?  An agreement to vary is no different from any other contract in terms of its formation.  It requires an offer, an acceptance and an intention to be legally bound, putting aside the question of consideration for the time being.  Offer and acceptance, on the facts of the present case, present no difficulty and can be readily inferred from the conduct of the parties.  No argument has really been raised in respect of the same (unlike the ticketing Manual which was not supplied to the cabin attendants).  The arguments raised all focus, in substance, on the third requirement, namely, an intention to be legally bound.  In other words, did the parties intend the RTB provisions to form part of the contract of employment (through variation) and have contractual force accordingly?

36.  In this regard, the nature of the Handbook and in particular the nature of the RTB provisions set out therein are of importance.  As mentioned, the Handbook set out the housing, medical and travelling benefits of the cabin attendants.  These are often described as “fringe benefits” or “perks”.  By the nature of things, they formed part of the employee’s remuneration package, and were obviously of importance to the employee’s overall bargain, for which the employee undertook to work.  Cathay argues that these important benefits did not form part of the employment contract but were only discretionary benefits which Cathay reserved the right to withhold from the employee.  In terms of the parties’ intention (objectively viewed), this is not an attractive proposition.  If the parties felt that there were circumstances under which those benefits should be withheld from the employee, those circumstances could be easily spelt out.  As a matter of fact, eligibility for the benefits was clearly set out in the Handbook.  Furthermore, it also stated that the employer reserved the right to reject any application for concessional travel “if improper use of travel concessions [was] suspected”.  No other circumstances for withholding the benefits were mentioned.  Nor were any such circumstances suggested to the Court at the hearing[4], still less any reason why such circumstances could not have been set out in the Handbook.  All this would suggest that the parties did not intend the benefits to be discretionary in nature only.

37.  As has been pointed out by Butterworths Employment Law Guide (4^th ed), para 1.26, quoted by the trial judge in paragraph 11 of the judgment, a company handbook can be quite a substantial document containing some matters which are quite arguably intended to be contractual terms (even if not expressly incorporated).  Whilst one is not concerned with a case of incorporation here because the 1991 Handbook was not in existence at the time the contract was entered into, but rather with a subsequent variation, it does not detract from the fact that the document in which the RTB provisions are found, namely the Handbook, is of a type in which one may reasonably expect to find terms intended to be contractual.

38.  There is evidence that this type of housing, medical and travelling benefits, including post-retirement travelling benefits, was very common amongst airline companies.  In other words, the benefits were not something so exceptional or extraordinary in character that, unless set out in a formal contractual document signed by the parties, they would not normally be regarded as contractual.  Likewise, in respect of the pre-1991 practice of Cathay itself, it cannot be denied that some form of RTB had already been in existence, although given the plaintiff’s case as run, it is not necessary to determine what the relevant benefits had been.  Given this general background, the RTB provisions contained in the 1991 Handbook were not something so novel that one would not expect Cathay and the cabin attendants to have intended them to have contractual force in the absence of formal contractual documents.

39.  The available evidence is to the contrary. There is evidence that in relation to the housing and medical provisions set out in the 1991 Handbook, Cathay did consider the provisions to be binding on itself as well as the employees, irrespective of whether the provisions were more favourable to the employee or were less favourable when compared with the standard Conditions of Service.  Thus, for instance, the Handbook contained provisions relating to rental allowance that were more favourable to the employee, and imposed more stringent time limits for medical claims and exclusions regarding the medical scheme.  They were, according to the evidence, regarded as binding on both parties.

40.  The RTB provisions in the Handbook simply followed the provisions set out in the internal Manual used by the sales and ticketing staff of Cathay.  There is nothing in the Manual to indicate to the relevant staff that the benefits enjoyed by cabin attendants were discretionary.

41.  This brings me to the point made by Cathay that both the Manual and the 1990 Staff Services Booklet, which preceded the 1991 Handbook, described the documents as a “guide” only.  In other words, the provisions therein were not intended to have contractual force.

42.  I do not think whether the RTB provisions in the Handbook were intended to have contractual force by the parties could be determined by the presence or absence of the word “guide” in the Manual or the Staff Services Booklet.  Whilst this sort of description should be taken into account, it should by no means be given decisive weight.  As Deakin & Morris, op cit, at para 4.33 (p 246), has pointed out:

“An increasingly important issue with regard to handbooks is the legal meaning of statements denying that particular benefits or provisions are legally binding on the employer. It may be open to the court to regard the terms in question as non-enforceable on the grounds of a lack of intention to create legal relations. If, however, the terms in practice constitute the normative basis for the parties’ relationship in the sense of being regularly observed and understood to be binding, a court may treat as irrelevant a statement by the employer that they are not, and conclude that they have contractual effect. This is because it is for the court, and not for the parties alone, to construe the arrangements in question; and the test of whether contractual effect exists is an objective one.”

In any event, the Handbook was not described as a “guide” only.

43.  Likewise, the use of individual words such as “eligible” and “concessional” is not decisive.  Not only must the text be fully examined, but one must also look at the entire relevant circumstances, to determine whether the provisions in question were intended to have contractual force by way of variation.

44.  It is notable that there is no known case of Cathay departing from the RTB provisions in the 1991 Handbook, save in the present case where Cathay disputes the applicability of those provisions to a dismissed employee, which is quite a different matter.  The consistent observance by Cathay of the RTB provisions contained in the Handbook in its dealing with its former cabin attendants, to whom the Handbook had been distributed, accorded well with the view that the RTB provisions were intended to have contractual force.  Cathay’s attitude towards RTB in the subsequent change of retirement age was, likewise, consistent with this view.

45.  I do not think the earlier case of Cathay Pacific Limited v Sumitra Jayasena Kelly HCAL 94/2005, 3 October 2006, decided by Deputy Judge L Chan, was of any real assistance to the defendant in the present case.  The finding there that the relevant benefits set out in the Staff Benefit Booklets were merely discretionary benefits because they had not been incorporated into the relevant contract of employment turned on the facts and evidence before the Court and the Labour Tribunal below (paras 30 and 31).  One cannot, therefore, draw any conclusion from that decision which was fact-sensitive, or from the subsequent refusal of this Court (differently constituted) to grant leave to the employee to appeal, which essentially turned on the limited right of appeal under section 35A of the Labour Tribunal Ordinance (Cap 25): HCMP 2448/2006, 18 April 2007.

46.  Having considered the entire relevant circumstances, I take the view that the RTB provisions contained in the 1991 Handbook were intended to have contractual force.  They did not represent discretionary benefits which Cathay could withhold from its cabin attendants.

47.  This is not to say that each and every provision in the 1991 Handbook were intended by the parties to have contractual force. Some of these provisions were quite plainly matters in the nature of what used to be called “work rules”, ie procedures and requirements for the smooth running of the business.  They were matters which remained within the managerial prerogative and discretion of the employer.  Butterworths Employment Law Guide, op cit.  However in relation to the RTB provisions, for reasons explained, they dealt with matters of an entirely different nature – matters going to the overall remuneration package of the employee.  As Hobhouse J said in Alexander, supra, where the relevant subject matter is one of present day-to-day relevance to the employer and employee, the continuing relationship between employer and employee provides a basis for inferring a contractual intent (para 27).

Consideration for the variation

48.  The next issue is therefore whether there was sufficient consideration to support the variation, whereby the RTB provisions, which were intended to have contractual force, did become part of the contract of employment between Cathay and the plaintiff.

49.  It is trite law that past consideration is no consideration.  In particular, a contracting party cannot use his promise to perform, or his actual performance of, a pre-existing contractual obligation as consideration for a new promise in his favour by his opposite contracting party.  Some fresh consideration is required.  Stilk v Myrick [1809] 2 Camp 317; Price v Rhondda Urban District Council [1923] 2 Ch 372.

50.  However, the rigour of the general rule as to consideration has been ameliorated, but not without critics[5], in cases such as Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1; Lee v GEC Plessey Telecommunications [1993] IRLR 383; Cheung Ting Wan v RIS Computers Ltd HCLA 16/1986, 20 June 1986, Deputy Judge Barnett.  In City Polytechnic of Hong Kong v Blue Cross (Asia-Pacific) Insurance Ltd [1995] 2 HKLR 103, 109, cited by the trial judge in para 33 of his judgment, Rhind J pointed out “a trend towards a pragmatic appraisal of consideration in commercial relationships”.  Rhind J attributed the observation of this trend to Lord Wilberforce in New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd [1975] AC 154, 167C-E, where his Lordship remarked 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.”

51.  The law must not depart from the reality of everyday life for no good reason.  Having concluded that the relevant provisions in the 1991 Handbook were indeed intended by the parties to have contractual force, and having observed that throughout both Cathay and its cabin attendants had honoured those provisions on that footing (save where genuine disagreement appeared regarding its scope of application, like what happened in the present case), it would take very compelling reasons for the Court to hold that what were regarded as contractual by the parties actually had no contractual force in law for want of consideration.

52.  I take the view that the necessary consideration for the variation was supplied by the employee not leaving Cathay.  It should be remembered that under the Conditions of Service, the plaintiff could have left Cathay at any time by giving one month’s notice (or one month’s pay in lieu of notice).  She did not do so. Plainly, part of the reason was her overall remuneration package, which included the RTB, that she was enjoying from her employment with Cathay. Indeed, that precisely was the main reason for the introduction of RTB by Cathay, that is to say, to encourage loyalty of its employees and to retain the services of its cabin attendants, particularly in light of competition from other airlines which offered similar packages.

53.  It should be borne in mind that the present type of consideration is entirely different from the one that has been found to be no more than past consideration in the cases.  In a typical case of past consideration, a promisee merely performs, or promises to perform, his pre-existing contractual obligations to the promisor.  That is no good consideration for the new promise from the promisor which the promisee seeks to enforce.  However, in the present case, one is not relying on any such purported consideration to support the variation.  Rather one is focusing on the plaintiff’s not exercising her contractual right to bring to an end the contract of employment as the necessary consideration for the variation.  In the former case, the promisee is using his promise not to break, or his not breaking, a pre-existing contract as consideration for a new promise.  In the present case, however, the plaintiff is using the non-exercise of her legal right to quit as consideration for the variation.

54.  I do not accept Cathay’s argument that on the evidence, the plaintiff was not thinking of leaving in any event.  The short answer is that the plaintiff did not think of leaving because she was satisfied with the overall remuneration package that Cathay was offering to her.  It would lead to an absurd result if only those employees, who had explicitly indicated an intention to stay on after learning of the RTB provisions in the 1991 Handbook, could enforce those provisions as having supplied the necessary consideration for the variation. 

55.  An employee who was happy with his existing remuneration package and therefore did not think of quitting did not fail to supply the necessary consideration for an enhanced remuneration package offered by his employer by staying on to work for the employer.  In staying on to work for the employer, he must have taken into account the enhanced remuneration package.  Put another way, the enhanced remuneration package must, like the previous remuneration package, have affected the employee in staying on with the employer.

56.  In my view, there has been sufficient consideration for the variation.

Do the RTB provisions apply to a dismissed employee?

57.  I now turn to deal with the question of whether the RTB provisions apply to a dismissed employee.  By a dismissed employee, I refer to an employee who, like the plaintiff, has been asked to leave by payment in lieu of notice.  It is common ground that for a cabin attendant who has been summarily dismissed for cause (without notice or payment in lieu), the RTB provisions do not apply.

58.  This is a matter of contractual construction.  One must construe the terms set out in the 1986 Conditions of Service together with the relevant RTB provisions in the 1991 Handbook as one entire contract.  In this regard, one must bear firmly in mind the words of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913B/C to D that the meaning which a document would convey to a reasonable man is not the same thing as the meaning of its words.  The meaning of words, his Lordship pointed out, is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.  The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even, as occasionally happens in ordinary life, to conclude that the parties must, for whatever reason, have used the wrong words or syntax.

59.  One must bear these words in mind when considering Cathay’s main argument that the words “retiree” and “retirement” do not cover a cabin attendant who has been dismissed.  In particular, Mr Burns has referred the Court to Young v Associated Newspapers Ltd [1971] Knights Industrial Reports 413 HC and Agco Ltd v Massey Ferguson Works Pension Trust Ltd [2003] IRLR 783, where in different contexts, the words “retirement” and “retire” were held not to cover a dismissed employee, whether for cause or otherwise.  Counsel argues that a “retiree” does not cover someone who has left employment “involuntarily”.

60.  It appears that the decisions in those two cases turned on their own facts and the particular wordings involved.  Thus, for instance, in Young, the subject pensions fund provided for deferred pensions if “retiring with the consent of the company”.  In those circumstances, it is not difficult to see that the word “retiring” did not refer to a dismissed employee.  A dismissed employee could hardly be said to have “retired” “with the consent of the company”.  In Agco, the relevant wording was “retires from service at the request of the employer”.  The wording was again different from the RTB provisions that one is concerned with in the present case.  As Rix LJ, who gave the lead judgment in Agco pointed out, on matters of construction, authority is unlikely to be decisive and may even prove deceptive (para 43).

61.  In my view, the provisions in the 1986 Conditions of Service are instructive in the proper construction of the RTB provisions, both of which must be read together.  The relevant provisions in the Conditions of Service have been extracted above and I will not repeat them here.

62.  Clause 25 has a caption “Resignation and Retirement”.  Clause 25(A) first deals with a cabin crew resigning by giving one month’s notice or one month’s pay in lieu.  There is no dispute that such a cabin crew is eligible for RTB (assuming that other eligibility requirements are also satisfied).  Clause 25(A) goes on to provide that when a cabin crew member is required to resign or retire by the company, he or she will be given one month’s notice or one month’s pay in lieu of notice, except as provided in clauses 27 and 28.  Clauses 27 and 28 deal with dismissal for cause “without notice or benefit”.

63.  Leaving dismissal for cause aside for the time being, for a cabin crew member required to resign or retire by the company pursuant to clause 25(A), he or she is entitled to one month’s notice or one month’s pay in lieu of notice.  Moreover, just like a fellow cabin crew who has voluntarily resigned by giving the company one month’s notice or one month’s pay in lieu, the cabin crew member who has been required to resign or retire is, according to clause 26, entitled to a retirement grant.  Under clause 26(A), retirement grants are calculated by reference to different percentages, depending on, apart from the number of completed years of service, whether it is a case of “normal retirement”, “retirement on medical grounds” or “cessation of service”.  Mr Burns accepts for Cathay that “cessation of service” covers both the case of a cabin attendant who has been required by the company to resign or retire pursuant to clause 25(A) as described, and the case of someone like the plaintiff, who has been dismissed by payment in lieu of notice (or by a month’s notice).  Indeed, it is common ground that the plaintiff has been paid her retirement grant upon termination of her employment.

64.  The important point to note here is that, despite the fact that an employee is required to retire or resign by the company, and is therefore leaving “involuntarily”, he is entitled to a “retirement grant”.  But not only that.  An employee who has been dismissed by payment in lieu, like the plaintiff, is likewise entitled to a “retirement grant” upon dismissal.

65.  The only person who is not entitled to a retirement grant is a cabin attendant who has been summarily dismissed for cause “without notice or benefit” pursuant to clauses 27 and 28.

66.  Mr Burns argues from the two English cases cited above that the word “retiree” only covers somebody who has voluntarily retired or resigned from a company, but does not cover someone who has left involuntarily – whether he has been dismissed or whether he has been required to resign.  It is therefore Mr Burns’ contention that so far as the RTB provisions are concerned, they do not cover a cabin attendant who has been required to resign or retire from the company pursuant to clause 25(A) of the Conditions of Service, or someone, like the plaintiff, who has been dismissed by payment in lieu of notice.

67.  It is immediately apparent that this submission stands at odds with the provisions in the Conditions of Service.  For, as explained, a cabin attendant who has been required to resign or retire by the company is nonetheless entitled to payment of a “retirement grant”.  It shows that at the very least, in relation to the word “retirement” in “retirement grant” dealt with in clause 26, the word bears a wider meaning than that contended for by Mr Burns.

68.  Indeed, clause 26 covers expressly cases of “cessation of service”, and, as Mr Burns has accepted, this term is taken to cover also a case of dismissal by notice or payment in lieu of notice.

69.  Reading the relevant provisions in the Conditions of Service and the RTB provisions in the Handbook together, as they form part of the same contract (after the variation), it is difficult to see why “retirement” and “retiree” when used in the RTB provisions should not bear a similarly wide meaning.

70.  First, when the same or similar words are used in the same or similar context in the same contract, one expects the words to bear the same or similar meaning.  Secondly, that is of course subject to any special definitions.  However, there is no special definition in the RTB provisions to give the relevant words a narrower meaning.

71.  Thirdly, it is difficult to see any difference in substance between a dismissal with pay or notice and a required resignation or retirement pursuant to clause 25(A).  Indeed it is tempting to think that when the draftsman provided in clause 25(A) for a cabin attendant to be required to resign or retire by the company by notice or payment in lieu of notice, he had in mind sections 6 and 7 of the Employment Ordinance (Cap 57) which provide for respectively termination of employment by notice and termination of employment by payment in lieu of notice.

72.  In any event, as a matter of contractual intention of the parties, given the absence of any substantive difference between a dismissal by notice or payment in lieu of notice and a required resignation or retirement by notice or payment in lieu of notice, it is difficult to see why there should be any difference in treatment between the two cases in terms of post-employment benefits.  In terms of retirement grants, I have already mentioned that it is accepted that there is no difference between the two cases.  In relation to the RTB provisions, I take the view that the two cases must stand or fall together as well.

73.  In this regard, I have not forgotten Mr Burns’ submission that for the RTB provisions, a cabin attendant who has been required to resign or retire under clause 25(A) is, like a dismissed cabin attendant, also not eligible for the benefits because he is not a voluntary resignee or retiree.  This argument is unpersuasive because the Conditions of Service have only provided that a cabin attendant summarily dismissed for cause shall be dismissed without “notice or benefit”. If the parties have intended that an involuntary resignee or retiree under clause 25(A) shall also be deprived of RTB, one would expect a special provision to deal with it.  The absence of such a provision suggests strongly that the parties have intended that the involuntary resignee or retiree is also eligible for RTB.  And, by the same token, a cabin attendant who has been dismissed by notice or payment in lieu of notice is also eligible for RTB.

74.  This construction is consistent with a subsequent definition given by Cathay when describing the applicable RTB scheme at the material times.  In a document issued in April 1995, a retiree has been defined as “a cabin attendant who has completed 10 years’ service, attained retirement age and is no longer employed by the company”.  Whilst a subsequent definition by a party cannot affect the proper construction of the provisions in the relevant contract, at the very least, the definition is quite consistent with the construction that I favour.

75.  Unlike the two English cases cited by Mr Burns, the RTB provisions in the Handbook are very simple in terms, and as a matter of language and grammar, they can easily accommodate an employee who has been required to resign or retire.  As mentioned, there is simply no difference in substance between such a former employee and one who has been dismissed with notice or payment in lieu.  That being the case, it is difficult to see why the parties did not intend the provisions to apply also to such a dismissed employee.

76.  Mr Burns argues that as a matter of presumed commercial intention, Cathay could not have intended that its RTB provisions should cover such a dismissed employee.  He prays in aid what was said by Brightman J (as he then was) in Young (at p 423):

“It would be natural for the company, when establishing a non-contributory pension fund, to exclude a dismissed employee from a deferred pension. An employee may be dismissed for a variety of reasons. He may, as in the present case, be dismissed in order to achieve the financial economies which the employer conceives to be necessary or expedient. He may be dismissed for wilfully and intentionally causing immense damage to the interests of his employer. There are infinite shades of colour between those two extremes. If the plaintiffs’ argument is correct, the most delinquent employee would be entitled to the same reward in terms of a deferred pension as the most loyal employee. It is hard to suppose that any employer, in his right mind, would knowingly establish a non-contributory pension scheme on quite those lines. It is not, therefore, particularly surprising to find that the dismissed employee is excluded from benefiting under the early retirement clause. The power is, at all times, in the hands of the company to relieve those cases of hardship which it thinks proper to relieve. The company, if it addresses its mind to the problem, can in an appropriate case invite an employee to resign and indicate that its consent will be forthcoming to that retirement.”

77.  This citation illustrates precisely why each case must be decided on its own facts.  In the present case, the above extract simply does not apply because the case of the “most delinquent employee” has been expressly and specifically taken care of by clauses 27 and 28 of the Conditions of Service.  Such an employee must leave service “without notice or benefit”.  On the other hand, in all other cases of “cessation of employment”, the employee concerned would be entitled to the retirement grant. In other words, the case of a “most loyal employee” is intended to be covered, and is indeed expressly covered, at least in terms of the retirement grant. One therefore asks, is there any commercial rationale to exclude such an employee from the RTB provisions nonetheless?

78.  For all these reasons, I take the view that the RTB provisions apply not only to those who have voluntarily resigned or retired from Cathay, but also to those who have been required to resign or retire by the company under clause 25(A), as well as those who, like the plaintiff, have been dismissed by notice or payment in lieu of notice.  The only class of former employees excluded is composed of those who have been summarily dismissed for cause without notice or benefit.

Standing policy of Cathay?

79.  Then it is said that there has been a standing policy of Cathay to exclude those who have been dismissed by notice or payment in lieu of notice from the RTB provisions.  The judge has made an express finding of fact against the existence of such a policy.  There was evidence before the judge to entitle him to reach that finding of fact.  In particular, the data supplied by the company have failed to show that apart from the case of the plaintiff herself, there has been any other case where a dismissed employee who would otherwise have been eligible under the RTB provisions, has been turned away by Cathay on the ground that he or she has been dismissed by notice or payment in lieu. 

80.  Moreover, the existence of the so-called “long-standing policy” was not backed by any contemporaneous written documents.  This alleged policy was not, in particular, spelt out in the ticketing Manual, the Staff Services Booklet, the 1991 Handbook, or the Conditions of Service, where one would expect such a policy to be set out clearly.  The origin of the policy was also unclear.  In those circumstances, the judge’s finding of fact cannot be disturbed by this Court.

81.  In any event, the Court has not heard any submission on how such an alleged long-standing policy could affect the proper interpretation of the contractual terms of employment between the parties or the enforcement of the relevant RTB provisions by the plaintiff against the defendant.

Estoppel

82.  In those circumstances, the judge was correct in finding for the plaintiff on liability.  It is therefore unnecessary to dwell on the alternative argument based on estoppel.  For my part, I do not believe that the plaintiff’s cause of action can be founded on estoppel.  However, given my primary conclusion, this is of no significance.

Special damages

83.  Finally, in terms of special damages, Cathay’s complaint is against the judge’s award of $149,543 in favour of the plaintiff. The sum represents the difference in airfares actually paid and airfares that would have been paid if the RTB provisions had been applied.

84.  On this matter of complaint, Mr Burns simply relies on what has been set out in paragraph 14 of the second supplementary notice of appeal.  Paragraph 14 of the second supplementary notice of appeal is most brief.  It simply complains that no relevant particulars of loss and damage have been pleaded, and no satisfactory evidence has been provided to justify the assessment.

85.  As to the first complaint, it is a pleading objection.  The judge dealt with it in paragraphs 91 to 93 of his judgment.  The judge noted that the claim was only sought at the time of trial; however, details of the claim were served on Cathay at the start of the trial in tabulated form.  The judge further noted that Cathay had had the opportunity of examining them and of cross-examining the plaintiff on them.  The judge saw no likelihood of “irreparable prejudice” to Cathay.  In the exercise of his discretion, the judge allowed the claim to be run.

86.  In my view, there is no basis for this Court, sitting on appeal, to disturb the judge’s exercise of discretion.

87.  As for the second matter of complaint, ie lack of evidence to support the claim, the judge had the various items of claim before him, he had the supporting evidence, and he heard evidence from the plaintiff, whom the defendant had ample opportunity to cross-examine, and the judge was satisfied with the amounts claimed.

88.  There is simply no basis to disturb the judge’s finding of fact.

Outcome

89.  For all these reasons, I would dismiss the appeal with costs to the plaintiff, with a certificate for two counsel.