LAW YING CHUNG v. LO CHUN KIE

CACV 28/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 28 OF 2004

(ON APPEAL FROM dccj nO.1071 OF 2002)

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 J U D G M E N T

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Hon Yeung JA:

1.  The defendant, Lo Chun-kie trading as Koon Hing Plastic Factory (Lo) employed the plaintiff, Law Ying Chung (Law) between 1968 and 2000.

2.  Lo summarily dismissed Law on 16 June 2000 without notice or payment in lieu.

3.  Law, on the basis that the summary dismissal was unlawful and unjustified, commenced proceedings in the Labour Tribunal against Lo.

4.  The claim for the total sum of $471,377.54 was transferred to the District Court in June 2002

5.  Apart from $12,430 being one month’s wages in lieu of notice and $261,404.56 being severance/long service payment, Law also claimed against Lo for the following sums:

(1)	a monthly sum of $250 (allowance A) since 1 February 1998, totaling $7,133;
(2)	a monthly sum of $1,500 (allowance B) since 1 November 1997, totaling $47,300;
(3)	a wrongful deduction of a monthly sum of $2,600 since 1 February 1998, totaling $79,429.33 less deduction of $309.35;
(4)	an annual bonus of $12,430 since 1997, totaling $43,011.20; and
(5)	payment in lieu of 57 days (reduced to 13.6 days at trial) of annual leave pay.

6.  In his defence, Lo sought to justify the summary dismissal on the basis that Law had willfully disobeyed lawful and reasonable orders; was guilty of misconduct, fraud or dishonesty; and was habitually neglectful in his duties.

7.  Lo relied on a series of 32 incidents between September 1997 and June 2000 to justify the summary dismissal.

8.  It was Lo’s case that prior to January 1998, Law’s monthly salary was $10,680 with a discretionary year-end bonus. However, due to Law’s poor performance, the salary was reduced by $2,600 to $8,080 per month and the year-end bonus was also cancelled. Lo also denied any contractual liability to pay allowance A or allowance B.

9.  Lo suggested that any un-taken annual leave should have been settled at the end of each Chinese Lunar Year.

10.  Apart from rejecting Law’s claim in its entirety, Lo also counterclaimed against Law for $36,000, being the balance of loans allegedly advanced to Law between September 1996 and January 2000.

11.  In his Reply and Defence to Counterclaim, Law denied the allegations of misconduct and/or neglect of duty. He said the various documents bearing his signatures purportedly showing that he had made mistakes and/or was guilty of misconduct were the result of persecution by Lo.

12.  Law averred that he had been receiving allowance A (although a smaller sum) since 1969 and allowance B since 1988 and that the reduction of his salary in January 1998 was Lo’s unilateral decision.

13.  In particular, Law said he had in fact lodged a claim in the Labour Tribunal in April 1998 against such unilateral reduction of wages which claim was subsequently withdrawn against Lo’s undertaking to repay him the deducted wages.

14.  Law said in order to get his year end bonus, he was forced to sign not only a note of indebtedness for $12,000, but also a “bonus agreement” whereby the monthly reduction of $2,600 would be put into a bonus pool and that he would get a lump sum of not less than $36,000 by the year end. However, Lo did not keep his promise and refused to pay him the lump sum year-end bonus.

15.  Law further said that he was forced to sign a note dated 12 February 1999 agreeing to abandon his bonus and acknowledging his indebtedness of $10,000 in order to get his year-end bonus of $10,000.

16.  In defence to part of the counterclaim, Law referred to the aforesaid circumstances in which he signed the notes acknowledging the indebtedness of the sums of $10,000 and $12,000. Another sum of $4,500 was said to be his allowance B for the months of August to October 1997. However, he was asked to sign a note of indebtedness for $4,500 in order to receive it.

17.  The case eventually went before Judge C B Chan (the judge) in the District Court. After a trial lasting about eight days in September and October 2003, the judge, in a judgment handed down on 28 November 2003, rejected Lo’s primary case that the summary dismissal of Law was justified.

18.  The judge also made the following further findings:

(1)	That the monthly reduction of $2,600 from the salary of Law was unilateral and that Law signed the “bonus agreement” because Lo threatened to enforce the loans owed by Law. In the circumstances, the reduction was not justified. Under the heading of arrears of salary, the judge granted Law the sum of $79,029.17;
(2)	Allowance A and allowance B were contractual in nature and not discretionary. Law was entitled to be paid such allowances and the judge awarded him the respective sums of $7,133.33 and $47,300;
(3)	That the year-end bonus was not discretionary and an award of $43,011.20 was made in favour of Law;
(4)	As the summary dismissal was unjustified, Law was entitled to be paid one month’s wages in lieu of notice of $12,430 and long service payment of $261,404.59;
(5)	Law had not taken a total of 13.5 days of annual leave and he was entitled to the sum of $5,557.73 in lieu; and
(6)	As Law had successfully recovered his claim for allowance B and the year-end bonus, he must account to Lo the various sums evidenced by the notes of indebtedness. The judge found for Lo in respect of his counterclaim against Law.

19.  In making the findings as she did, the judge accepted the evidence of Law and rejected the evidence of Lo and those of his witnesses.  In so far as Law had acknowledged in writing his “mistakes and/or misconduct” in the 32 incidents between September 1997 and June 2000, the judge noted the following:

(1)	The plaintiff (Law) signed and made admission of faults;
(2)	All these incidents happened in the last three years of the plaintiff’s term of employment of 32 years.

20.  The judge made the following finding of facts:

“In relation to the allegation of the plaintiff (Law) that he was pressurized to sign the admissions in the documents unwillingly when he did not agree to the contents thereof, I do accept that the plaintiff must have acted under great pressure to admit or to sign documents. From the evidence, the defendant had often required Szeto Lai Chun or Lo Chun Cheung to obtain written signed reports of wrong-doings from the plaintiff. At times he had been angry with Szeto Lai Chun for failing to obtain the signature of the plaintiff on documents. There have been instances when the defendant told the plaintiff to write the  particular words or admission or understanding that he would not commit the  same wrong again. These incidents are not disputed and evidence came from  the defendant and his witnesses in the accounts referred to aforesaid.

The defendant is also a man prone to displays of anger such that Szeto Lai Chun had stated in evidence that she was fearful of coming under his scolding and his temper. No doubt, it was the same for other members of his staff. The defendant himself admitted to calling his staff in to scold them. Again the evidence of this is recorded aforesaid. The anger of the defendant in the unwillingness of the plaintiff to immediately sign Minutes of Meeting is not commensurate with the significance of the act. The defendant saw it as an act of disobedience when the plaintiff should naturally have a right to consider the contents of a report before signing. Hence, the culture of this Company and the atmosphere under which the plaintiff had to work is clearly one where there is little grace but instead it was an atmosphere where the plaintiff was picked on for faults and errors and asked to confess and sign admissions to incriminate himself. The plaintiff also had hanging over his head the threat of not being awarded the year-end bonus for the year following that issued in January 1998. Not only that, the plaintiff had his salary forcibly reduced. This could be regarded as a serious repudiatory breach of the contractual obligation of an employer and could be the basis for constructive dismissal of an employee (see para. 3.55 The Law of Termination of Employment by Rebert Upex at page 139). The plaintiff also had been enticed to cancel his claim filed with the Labour Department under the offer to re-instate his reduced salary. This was subsequently not honoured. He had been pressured to write and sign the note at page 4 of BD2 at the request of the defendant.

I therefore accept that there has been pressure on the plaintiff to incriminate himself with admissions and confessions on appraisal of events, which are one-sided. They were purely from the perception of Lo Chun Cheung or the defendant and not a balanced or fair perspective as they were written with no reference to explanations given by the plaintiff. I therefore do not accept the way in which these incidents of misconduct had been reported in the documents submitted by the defendant as they are not fair and/or accurate records of events. The explanations given by the plaintiff in evidence provides a more balanced perspective. Where the plaintiff seeks to give an explanation to the incidents recorded, I take into account his version of the events and accept them as an accurate account from his perspective.”

21.  If the summary dismissal was justified, most of Law’s claims had to be dismissed and hence this issue was clearly important if not decisive.

22.  Mr Ng, in the course of his submission conceded that in relation to the allegation of “misconduct”, he only relied on one incident in early 2000 when Law made long distance calls to Hong Kong while he was in Shenzhen to place bets on horse racing.

23.  However, Mr Ng suggested that there were many incidents showing that Law had made mistakes in connection with his duties as the supervisor of the factory in Shenzhen and that such mistakes, when viewed in their totality, constituted habitual neglect in his duties.

24.  Having obtained leave to appeal from the judge, Mr Ng attacked the judge’s finding of facts on the basis that such finding was contrary to documentary or other incontrovertible evidence and that the judge had overlooked such evidence. That is not so. The judge had the documentary evidence in mind but found that they were one-sided, and Law was pressured into signing them.

25.  Mr Ng emphasized that the 32 incidents took place over a period of over two years and were evidenced by documents signed by Law. Mr Ng opined that no reasonable employer would plan for more than two years to find “faults” in an employee for the purpose of dismissing him summarily. He said it was too complicated a plot and was too time consuming.

26.  What Mr Ng had overlooked, but was noted by the judge at para. 54(b), was that Law started working for Lo in 1968 and for the initial 30 years, there was no incident whereby it was thought necessary to have a written record of any “fault” on the part of Law. It only started in late 1997 after the relationship between Law and Lo deteriorated.

27.  Was it because Law was such a perfect employee that he never made any mistake prior to 1998? If he was such a perfect employee what was the reason for the sudden change? If Law also made similar mistakes in the 30 years before 1998, why did Lo not find it necessary to have written records of the mistakes acknowledged by Law?

28.  The evidence showed that clearly the relationship between the parties started to deteriorate after Lo’s second son, Law Wah Fai took over the management of the factory leading to the filing of a complaint with the Labour Department by Law in early 1998.

29.  The judge said in her judgment “the style of management and the atmosphere under which the plaintiff (Law) had to work becomes clear from the evidence of the witnesses”.  She also made the following observations:

“The defendant (Lo) demonstrated from his evidence and his demeanor that he is not a man that could be crossed. He could not stand any resistance to his autocratic views. He could not see any perspective other than his own. He is also given to strong expression if not angry expression. This was clear even in his outbursts when cross-examined by the plaintiff’s solicitor. A description of the defendant’s management style is ‘patriarchal’. It seemed to me that given his personality and character the defendant would do his best to stop the plaintiff’s process of his complaint with the Labour Department on the 1^st April 1998. As the section of the Labour Department dealing with this complaint was the dispute resolution section, it would be highly likely that the defendant would also be approached by the Labour Department to attend an interview. In my view it was highly likely that he would have threatened the plaintiff with repayment of the loans due to the defendant from deduction of the plaintiff’s salary.”

30.  The fact that written records of Law’s fault were made only in the last three years of his 32-year employment had its significance. The judge rightly recognized such significance.

31.  In modern society, employment relationship rests on equality, mutual respect to achieve maximum benefit for both parties. Employers should not regard their employees as subservient to their business nor should they rigidly demand punctilious obedience from them.

32.  While I certainly would not encourage any employee to indulge in gambling, particularly during working hours, I am not persuaded that such an isolated incident could possibly justify summary dismissal of the employee.

33.  Immediate dismissal of an employee by reason of one single act of misconduct, in my view can only be justified in very exceptional circumstances. Lord Maugham made the following observation in Jupiter General Insurance Co v Shroff  [1937] 3 All ER 67, 73,

“Their Lordships recognize that the immediate dismissal of an employee is a strong measure, and they have anxiously considered the evidence with a view to determine the question whether the trial judge was right in his finding that the respondent was guilty of gross negligence, which, coupled with his conduct at the interview of Dec. 21, was sufficient to justify his dismissal. On the one hand, it can be in exceptional circumstances only that an employer is acting properly in summarily dismissing an employee on his committing a single act of negligence; on the other, their Lordships would be very loath to assent to the view that a single outbreak of bad temper, accompanied, it may be, with regrettable language, is a sufficient ground for dismissal. Sir John Beaumont, C.J., was stating a proposition of mere good sense when he observed that in such cases one must apply the standards of men, and not those of angels.

Placing, however, all proper weight on these considerations, their Lordships have yet to determine, in view of facts found by the trial judge, apart, of course, from the vital finding that the circumstances justified dismissal, whether the misconduct of the respondent was not such as to interfere with and to prejudice the safe and proper conduct of the business of the company, and therefore to justify immediate dismissal. It must be remembered that the test to be applied must vary with the nature of the business and the position held by the employee, and that decisions in other cases are of little value.”

34.  In The Law and Practice of the Labour Tribunal, R.A. Ribeiro (now Ribeiro, P.J.), when dealing with “misconduct” under section 9(1)(a)(ii) of the Employment Ordinance, Cap 57 (the Ordinance) states,

“It is therefore important to remember that, whatever the precise complaint, the modern approach is to regard all forms of summary dismissal as a ‘strong measure to be justified only in exceptional circumstances’. Indeed, the case must involve misconduct which ‘goes to the root of the contract so as to indicate an unwillingness to continue to be bound upon the original terms. A similar approach is found in the Employment Ordinance, which approves of summary dismissal for misconduct only where that misconduct is ‘inconsistent with the due and faithful discharge of the employee’s duties.”

35.  There was no suggestion that the placing of bets on horse racing by Law, albeit during office hours, would in any way interfere with or prejudice the safe and proper conduct of the business of Lo’s factory in Shenzhen.

36.  It could not possibly be argued that Law’s placing of bets “goes to the root of the contract so as to indicate an unwillingness to continue to be bound upon the original terms’, or that it was “inconsistent with the due and faithful discharge” of Law’s duties.

37.  The judge correctly noted that the placing of bets by Law was an isolated incident as “if he had been found in the same error again, it would be most surprising if Lo Chun Cheung or anyone who discovered it would not have reported it to the Defendant (Lo).”

38.  The suggestion that Lo was justified in summarily dismissed Law because of this isolated incident of betting on horses was far-fetched.

39.  In any event, Lo did not dismiss Law immediately after he found out about such placing of bets in January 2000. He only dismissed Law six months later by which time he must be taken to have over-looked the alleged “misconduct”.

40.  Mr Ng sought to rely on the other incidents to justify the suggestion that Law was guilty of being habitually neglectful in his duties.

41.  In paragraph 68 of her judgment, the judge correctly stated what constituted being “habitually neglectful” under section 9(1)(a)(iv) of the Ordinance to justify summary dismissal of an employee. She referred to the judgment of Duffy J in Chow In Chun v Fang Brothers Knitting Ltd HCLA 55 of 1987 when his Lordship stated:

“In The Law and Practice of the Labour Tribunal R.A. Ribeiro includes a useful chapter on termination of contracts and at page 57 deals with section 9(1)(a)(iv) of the Employment Ordinance and the meaning of the expression ‘habitually neglectful’. He emphasizes that the neglect must be substantial and it must be habitual. He also distinguishes cases of actual negligence in performing duties from cases where duties were neglected i.e. absence from or lateness for work.”

42.  I have examined the “well-documented” incidents carefully. Taking them at their highest, they were incidents when Law was alleged to have been sometimes negligent, or had sometimes failed to follow the correct procedure or had sometimes made mistakes.

43.  The judge had dealt with each and every incident and made her findings. I see no ground to disagree with her findings. I also take into consideration Law’s lengthy service and I have tried to balance the impact of summary dismissal on Law with the effect of his alleged “neglect”, in deciding if the summary dismissal was justified.

44.  No employee is perfect. Law was no exception. However, I am firmly of the view that the judge was right to find that the incidents relied on by Lo, either individually or collectively, did not justify the summary dismissal of Law.

45.  An employer is obliged to pay his employee lawful wages. He has no right to reduce the wages at his whim. He is not even entitled to deduct the wages of an employee other than in accordance with the Ordinance.

46.  Wages includes “all remuneration, earnings, allowances including traveling allowances and attendance allowances, attendance bonus, commission, overtime pay, tips and service charges, however designated or calculated, capable of being expressed in terms of money, payable to an employee in respect of work done or to be done under his contract of employment…”

47.  Law asserted in his claim that on top of his monthly salary, he used to be paid allowance A, allowance B, and the year-end bonus of at least one-month’s salary.

48.  In his defence and counterclaim, Lo set out what according to him were the monthly wages of Law immediately prior to his dismissal. However, Lo did not specifically deny Law’s claim that he used to be paid the allowances and bonus.

49.  In relation to allowance A and allowance B, Lo, in his defence, pleaded only:

“Regarding paragraphs 5(a) and (b), the Defendant avers that as the employment contract has not provided for any monthly allowance in the sums as alleged, the Defendant is not liable to pay the Plaintiff any of the allowance ‘A” and allowance ‘B’ as alleged.”

50.  In relation to the year-end bonus of not less than one-month salary, Lo also pleaded:

“Regarding paragraph 5(d), the Defendant avers that as the employment contract has not provided for any annual bonus payment as alleged and that bonus payment was not necessarily payable, the Defendant is not liable to pay the same to the Plaintiff.”

51.  It was thus clear that Lo’s pleaded case was not that there was no allowance “A”, allowance “B”, or the year-end bonus. His pleaded case was that those payments were discretionary, as the employment contract did not make provision for such payments.

52.  In the letter addressed to Lo dated 7^th June 2000 (pages 28 and 29 of the Appeal Bundle), Law expressly demanded for the payment of the outstanding sums, including the monthly allowances of  “A” and “B” as well as the year-end bonus. In his reply (p.40 of the Appeal Bundle), Lo only denied the year-end bonus but not the monthly allowances of “A” and “B”. One would expect such a denial on the contemporaneous documents.  There was none.

53.  The Employer’s Returns submitted to the Inland Revenue Department by Lo in respect of Law’s employment indicated that from 1982 onwards until 1998, Law received a yearly bonus of at least the equivalent of one-month salary, but sometimes many times his monthly salary.

54.  The bonuses for the years 1987-88, 1988-89, 1989-90, 1990-91, 1991-92, 1992-93, 1993-94, 1994-95, 1995-96, 1996-97, and 1997-98 were respectively $25,000, $42,000, $53,000, $50,000, $48,000, $48,000, $48,000, $43,000, $43,000, $30,000 and $15,000 respectively.

55.  The judge, having heard evidence from both parties, concluded that there were the payments of the monthly allowance of “A” and allowance “B” as well as the year-end bonus of at least one-month salary. The judge also concluded that such payments were obligatory and not discretionary as suggested by Lo. The judge was entitled to reach such decision as there was evidence to support it.  An appellate court would be very slow to overturn a finding of fact supported by evidence.

56.  Indeed, if the bonuses were discretionary as suggested, there was hardly any need for Lo to have to obtain Law’s consent in early 1998 as he alleged to enable him to deduct the whole or part of the bonuses when Law failed to perform satisfactorily. 

57.  Lo’s suggestion that the bonuses were discretionary was not supported by his own documents.

58.  Mr Ng sought to persuade us that the parties had a new bonus agreement in early 1998 whereby Lo was entitled to deduct all or part of the bonuses.

59.  He also emphasized that Law had also agreed to the deduction of $2,600 a month from his salary and as he had, for a period of 29 months received the reduced salary, he must be taken as having accepted such reduced salary.

60.  Section 70 of the Ordinance provides:

“Any term of a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by this Ordinance shall be void.”

61.  Mr Ng argued that the section had no application to the parties’ agreement that the bonuses and wages payable to Law could be extinguished or reduced as they were not “right, benefit or protection conferred upon the employee by this Ordinance”.

62.  Part IIA of the Ordinance stipulates the time for the payment of year-end bonus and the amount of such payment. Part VI of the Ordinance prohibits the unauthorized deduction of wages. The amount of compensation payable to an employee under the Ordinance depends on the “wages” of the employee.

63.  Both wages and year-end bonus are indeed “right, benefit or protection conferred upon the employee by this Ordinance”.

64.  Whilst parties to an employment agreement can agree, by way of a new contract, to reduce the wages payable to an employee, the deduction of Law’s bonus or wages, particularly those that had already been earned, by reason of his poor performance would be caught by section 70 of the Ordinance.

65.  In any event, having considered the background of the case and the evidence of the parties, the judge concluded that the purported agreement could not be relied on as Law was coerced into signing such agreement.

66.  The documents clearly support Law’s case. The document dated 2^nd April 1998 indicated that a monthly sum of $2,600 would be taken from Law’s wages and put into a bonus pool and that Law would be paid a guaranteed sum of $36,000 or more as year-end bonus.

67.  The other document dated 12^th February 1999 purported to cancel Law’s “bonus” including the monthly deduction of $2,600 as Law was unable to meet the requirement of the factory.

68.  The judge concluded that the decision to reduce Law’s monthly wages by $2,600 was a unilateral decision of Lo.

69.  The judge had dealt with in great detail how the reduction of $2,600 a month from Law’s salary occurred. She accepted Law’s evidence that the purported acceptance of the reduction by Law and the purported bonus agreement were the result of threat and pressure and should not be enforced.

70.  I am fully convinced that on the evidence before the judge, she was entitled to reach such conclusion.

71.  The fact that an employee accepts partial payment of his salary in accordance with a capricious decision of his employer does not mean the employee agrees to such decision or that he is estopped from claiming the arrears of wages upon the termination of the employment.

72.  The reversal of the trial judge’s findings of facts, particularly findings of primary facts based on credibility of witnesses, is only justified in very special circumstances, namely that “the judge’s conclusion is plainly wrong in the sense that either (1) that there is no evidence to support it; or (2) that it is contrary to documentary or other incontrovertible evidence that the judge overlooked” (see A solicitor v The Law Society of Hong Kong, CACV 302 of 2003 unreported).

73.  In Tang Kwok Keung v Tam Dick Yuen [2002] 1 HKC 601, Bokhary PJ said at page 613,

“On an appeal against a judgment of a judge sitting alone’—Lord Sankey LC said in Powell v Streatham Manor Nursing Home at p 249 – ‘the Court of Appeal will not set aside the judgment unless the appellant satisfies the Court that the judge was wrong and that his decision ought to have been the other way’. I would reinforce that by respectfully adopting what Lord Hoffmann said in Biogen Inc v Medeva pls [1997] PRC 1 at 45 and repeated in Piglowska v Piglowski at p 1372 D-F:

 ‘The need of appellate caution in reversing the trial judge’s evaluation of the  facts is based upon much more solid grounds than professional courtesy. It is  because specific findings of fact, even by the most meticulous judge, are  inherently an incomplete statement of the impression which was made upon  him by the primary evidence. His expressed findings are always surrounded  by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance… of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation.’

Where the judgment turns on an issue of fact, the Court of Appeal must have regard to the nature of that issue of fact. And it must have regard to the advantages enjoyed by a trial judge who received the evidence on such an issue at first-hand, in other words, in whose presence the whole of the evidence unfolded in its living state. Such advantages can be, as Lord Shaw of Dunfermline put it in Clarke v Edinburgh Tramways at p 36, ‘sometimes broad and sometimes subtle’. The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong. The Court of Appeal should intervene if so satisfied. But if not so satisfied, the Court of Appeal should defer to the trial judge’s conclusion even if in some doubt as to its correctness.”

74.  Having viewed the background of the case and the evidence presented at trial, I am firmly of the view that the judge had come to a correct decision, and in any event, there is no valid basis upon which I can overrule her decision.

75.  None of the matters put forward by Mr Ng justifies setting aside  the orders of the judge. There is no merit in the appeal and it is dismissed with costs.  Law’s own costs is to be taxed in accordance with the Legal Aid Regulations.

76.  I also order that the payment into court by Lo is to be paid out to Law forthwith.

Hon Cheung JA:

77.  I agree with the judgment of Yeung JA except that I do not regard it necessary to consider s.70 of the Employment Ordinance on the facts of this case.  I also agree with the orders Yeung JA proposes to make.

Hon Yuen JA:

78.  I agree with the judgment of Yeung JA save that I do not consider it necessary in this case to consider the applicability of s.70 of the Employment Ordinance given the findings of fact by the trial judge that the employee had not signed the "New Bonus Agreement" freely.  Having said that, I would briefly set out my views, as submissions on the issue have been made by counsel for the respective parties. 

79.   The contract of employment in the present case was not one for a fixed term at a stated salary.  It was a continuous contract which, by operation of s.5(1) Employment Ordinance, was deemed to be a contract for 1 month renewable from month to month.  As such, it was open to the parties to freely agree terms of a fresh contract, including new terms which may be less beneficial to the employee than the pre-existing terms.  In such a situation, there would only be a "reduction" of wages under the fresh contract, not a "deduction" of wages under the pre-existing one.

80.  However for such a fresh contract to be made, the pre-existing contract would of course have to be terminated.  In appropriate cases (which this was, given the length of the employee’s service), the employee would then be entitled to long service payments under Part VB and the statutory provisions for employment protection under Part VIA of the Employment Ordinance would then apply.  That Part includes remedies for the employee to obtain payment of benefits where the terms of re-engagement under the fresh contract are not as favourable as those under the pre-existing contract (see e.g. s.32C). 

81.   Insofar as the fresh contract seeks to include a term under which the employee forgoes all or part of his entitlements under, say Part VB, such a term would "purport to extinguish or reduce" the employee’s rights under the Ordinance and s.70 would then, in my view, apply to render that term void.