FERNANDES VILMA v. CATHAY PACIFIC AIRWAYS LTD

HCLA 40/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 40 OF 2003

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO. 2709 OF 2002)

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J U D G M E N T

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1. The Claimant was formerly employed by the Defendant as a flight attendant. She was dismissed by the Defendant on 8 October 2001 with the payment of one month's salary in lieu of notice. She lodged claims in the Labour Tribunal against the Defendant.

2. On 5 March 2003, Ms Tracy Chan sitting as the Presiding Officer of the Labour Tribunal dismissed all the claims of the Claimant in LBTC 2709 of 2002. The Claimant sought leave to appeal and leave was granted by this court in respect of one claim only, viz. her claim in respect of annual free of charge ticket. The Presiding Officer regarded the air tickets as part of the rebated travel scheme that was a privilege extended by the Defendant to its employees and not a right. The Presiding Officer held that such privilege was meant for serving employees and the only two exceptions were retirement and resignation. In granting leave to the Claimant, this court allowed the following ground of appeal to be argued,

"In holding that the rebated travel scheme was a privilege instead of a contractual entitlement of the Claimant, the learned Presiding Officer erred in law in failing to take into account of Paragraph 17 of the Conditions of Service for Cabin Crew setting out the terms of employment of the Claimant."

3. The Claimant first joined the Defendant on 2 March 1993. She was a non-local cabin crew. At that time, the Conditions of Service contained the following provisions which are relevant for present purposes,

" Annual FOC Ticket

(A) Each cabin crew member will be entitled to one annual FOC ticket (Y/J/F classes) as follows:-

FOC subload ticket with nosub "bookable" return for the last sector from any of the existing CX operated online ports as at 1st January 1983. In the case of a full aircraft from the following ports, a limit of up to three cabin crew will be allowed to travel on a nosub basis (BKK, BOM, KUL, PEN, SIN, JKT, MNL, TPE, FUK, OSA, TYO, SEL)

(B) The annual FOC ticket, subload basis, will be extended to the spouse of cabin crew who have completed ten years of service. Single cabin crew members with ten years of service may nominate any eligible dependant for the annual FOC entitlement.

(C) The annual FOC ticket can be carried forward for one year. After issue, the annual FOC ticket can be re-validated and the destination changed up to a period of one year."

4. In 1995, the Defendant introduced a new set of Concessional Travel Policy that encompassed various travel benefits provided by the Defendant to its staff. It was subsequently revised in 1997 ["the 1997 Policy"]. Although parties initially argued the appeal by reference to the 1995 version, the Presiding Officer had decided this part of the claim by reference to the 1997 revision. There is no ground of appeal asserting that the Presiding Officer relied on the wrong set of policy and it is therefore not open to the Claimant to revert back to the 1995 version. In fact, the Claimant had enjoyed benefit in accordance with the 1997 Policy.

5. The relevant provisions of the 1997 Policy are as follows,

" CONCESSIONAL TRAVEL ON COMPANY SERVICES

PRINCIPLES

To provide travel privileges which give the greatest benefit to all employees, whilst ensuring that we do not negatively impact commercial requirements, and that we maintain the exclusivity of our First Class premium product that our high yield passengers demand.

POLICY

1.	CONDITIONS
	Subject to overriding commercial considerations, travel at free and rebated rates on the Company's services may be granted to employees, retirees, widows and widowers, eligible dependants and companions, according to the conditions outlined in this policy.
	Rebated travel entitlements for the above are a privilege extended by the Company, not a right and may be varied or withdrawn at the Company's discretion.
	This policy replaces all existing travel policies, but does not override provisions protecting existing conditions of service, unless agreed by the employee concerned. Employees who have elected to remain with their existing conditions of service will not receive any improvements made to travel benefits or services provided by the Company.
	Travel concessions are for leave and recreational purposes only. These concessions may not be used for private business, commercial purposes, or for services for other parties. The Company reserves the right to reject any application from employees if improper use of concessional travel by staff, eligible dependants or companions is suspected.
	Travel concessions are personal and not transferable except where specifically stated.
	It is the responsibility of each employee and retiree to ensure that their eligible dependants and companions follow the conditions as outlined in this policy.
...

5.	FREE OF CHARGE TRAVEL (FOC TICKETS) - Employees and Eligible Dependants
	Eligibility - employees who have completed a minimum of 12 months continuous service, their spouse and up to a maximum of three children up to and including the age of 18 years. Children under the age of two years will be issued a ticket but will not be entitled to a booked seat. Entitlement - one ticket per year. The first ticket will be available one year from date of joining the Company. Thereafter it will be provided on 01 January each year. Reservations - travel is bookable on a NOSUB, Priority 11 basis, if seats available at time of booking. Bookings are always subject to seat availability in the appropriate class or sub-class. If seats are not available on the desired flight, employees can be waitlisted, and/or choose an alternate flight. - Expatriate employees, including overseas employed Cabin Crew, and their eligible dependants will be entitled to a Priority 4 ticket, when travelling to their port of domicile/homeport. If dependants are not originating their travel from the employee's port of employment to the port of domicile/homeport, they will travel on Priority 11. - a maximum of 4 sectors is allowed for each ticket - all HKG based employees must make their bookings through Travel Services - Outport employees will make bookings through their local reservations office - if booking is no longer needed, it must be cancelled at least 72 hours prior to the flight
	Note: Even when confirmed on a flight, downgrading or offloading may still occur if necessary for operational purposes. Every endeavour will be made to ensure that employees and eligible dependants travel in the booked class. However, due to commercial considerations this may not be possible. NO "refund" or replacement ticket will be issued if actual class of travel was different to entitlement.
	Booking Class - Levels A/B/C - booked in Economy Class ("S" class for priority 11 and "Y" class for priority 4) - Levels D/E - booked in Business Class ("Z" class for priority 11 and "J" class for priority 4) Routings - return-trip only, not one-way - destinations can include any CX on-line port, system-wide, to a maximum of four sectors - travel can originate at any port, but cannot transit the home port more than once or return to the same port/Zoned more than once
	E.G.: HKG based employees HKG/YVR/NYC/YVR/HKG - allowed LON/HKG/SYD/HKG/LON - allowed HKG/TPE/HKG/SIN/HKG - not allowed (return to HKG more than once) YVR/HKG/YYZ/HKG/YVR - not allowed (YVR, YYZ: return to the same zone more than once)
	Ticketing - FOC tickets cannot be accumulated. If they are not issued in the year in which they accrue, they will be forfeited. - tickets must be issued by 31 December of the year in which they accrue. They will be valid for one year from date of issue. Once expired, and if the coupons have been used in sequence, they can be extended up to the end of the calendar year following the year of accrual - each ticket must be issued on a return basis. Two one-way tickets cannot be issued in lieu of one return ticket - tickets can only be re-issued for a new routing if they are totally unused - FOC tickets are non-transferable and cannot be pooled - applicable tax(es) will be collected by the Company on behalf of the government concerned
...
11.	RESIGNATION
	Any rebated or FOC tickets granted PRIOR to employees leaving the Company must be used within thirty (30) days of their termination of employment. Tickets must be applied for and issued on or before the last paid day of work. Only tickets that have been paid for can be used during the aforementioned 30 day period.
	For HKG based staff, unpaid 'Flown' ticket coupons cannot be used within thirty (30) days of date of resignation. If tickets are required during the last month of employment, a paper form application must be made to Travel Services and cash payment will be requested when tickets are issued.
	All unused valid 'flown' coupons must be returned to Travel Services and each lost coupon will be charged a nominal handling charge, currently HK$400. All Travel Cards must be returned to the Benefits Centre (except cabin crew, who should return their Travel Cards to ISD Services Team), prior to last day worked.
	Any unauthorised use of tickets after resignation will result in a charge of the applicable full fare(s).
GENERAL PROCEDURES
1.	TRAVEL SERVICES in HKG
	NOSUB bookings (including changes to existing bookings) are handled by Travel Services, for HKG based employees. Flight load information can be found in Travel Cupid System (TVLCUPID) in Common Access. Employees should not call HKG Reservations office during normal office hours for any of the aforementioned.
	Travel Services is open during normal business hours to assist employees with bookings, ticketing, queries and flight load information.
	Enquiry/Booking numbers: Local staff/ Cabin Crew 2747 2877 Expatriate Staff 2747 2822
	Employees at outports should make all bookings and listings with the local Reservations office.
2.	NOSUB BOOKINGS
	All ID50/ID75, Duty Travel, and FOC NOSUB bookings for HKG based staff are made through Travel Services. Bookings should be made as much in advance as possible to avoid the disappointment of full flights.
	ID50 bookings on interline carriers are to be made directly with the carrier concerned.
	Note: if a firm booking is held and the employee then decides to use a Zoned fare ticket, the firm booking must be cancelled at least 72 hours in advance of flight. If the firm booking is not cancelled the employee will not be accepted on a Zoned ticket, even if there are seats available.
	Staff who ' no-show' or fail to cancel a firm booking may be subject to disciplinary action, unless a reasonable cause is provided.
3.	SUBLOAD LISTINGS (for any tickets which do not allow a firm booking)
	It is not necessary to list on flights departing from Hong Kong. At all other ports, passengers must list themselves, through the local reservations office, at least 48 hours prior to flight departure. When calling, employees should avoid peak periods, identify themselves as CX staff, and be prepared to provide name of ticket holder, destination, flight number, class of travel, priority and the employee's date of joining.
	Subload listings on interline carriers should be made directly with the carrier concerned.
	...

5.	TICKETING
	Concessional travel tickets, for HKG based employees, are issued either by Travel Services, or are self-ticketed from a ticket printing machine, as follows:
	FLOWN Ticket Travel Services Printing Machine CX Zoned fare ID50-ID75 Compassionate tickets Tickets tickets Annual FOC tickets Student tickets Interline tickets Repatriation tickets Tickets for resigning staff/staff on long unpaid leave/retirees
	When requesting any concessional tickets employees are to complete the application form in 'STEPS'.
	CX Zoned and FOC tickets must be printed within two days of making your applications from Flown ticket printing machines, located at several CX main areas.
...
8.	REFUNDS
	NO refunds will apply to unused FLOWN coupons as these coupons are charged only after the flight has been taken.
9.	CHECK-IN
	Employees should check-in at the airport Staff Services counter, if applicable, or at the counter matching the class of travel of ticket being used. In HKG, a 'flight Status' display at the Staff Services counter indicates whether you should check-in at another counter.
	Employees and eligible dependants should always be prepared to present their identification cards.
	For HKG based staff, when using Flown ticket coupons, identification cards MUST be shown:
	Employees - CX ID card or Staff Services card Spouse/Children - Staff Services card Family Travel - Travel Card Dependants/Companion
	These cards will gradually be replaced by new CX smart cards in 1998."

6. The first point taken by Mr McLeish, counsel for the Defendant, was that the Policy had replaced the Conditions of Service and the Presiding Officer was correct in disregarding the latter. On the other hand, Mr Ng counsel for the Claimant argued that the Policy did not have such effect. The key lies with the construction of a paragraph in the 1997 Policy,

"This policy replaces all existing travel polices, but does not override provisions protecting existing conditions of service unless agreed by the employee concerned. Employees who have elected to remain with their existing conditions of service will not receive any improvements made to travel benefits or services provided by the Company."

There is a similar provision in the 1995 version. Although there were some slight changes in the wordings, I do not find them to be material for present purposes.

7. Since the Claimant had subscribed to the 1995 Policy, she had agreed to the same and the exception could not assist her in preserving the effect of the conditions of service. However, Mr Ng argued otherwise. He submitted that Clause 17 in the conditions of service was not a provision protecting existing conditions of service; hence the Defendant could not rely on the agreement by the Claimant to override its effect. I must reject that submission. Assuming Mr Ng were correct in his contention that Clause 17 was not a provision protecting existing conditions of service, the implication would be that it would be caught by the first part of this paragraph in the Policy, viz. it would have been replaced as part of the existing travel policies even without the agreement on the part of the employee concerned. Therefore the contention does not assist the Claimant. In any event, it is plain to me that by signing into the new policy, the Claimant accepted that the governing rules for her travel benefits were set out in the Policy instead of the conditions of service. In law, it was a variation of the terms of her employment contract.

8. Although the Claimant had resigned in March 1999 under a voluntary resignation scheme and was then re-employed from 17 January 2000 until her dismissal on 8 October 2001, there is no suggestion that these affected the implications stemming from the above analysis.

9. As Mr McLeish pointed out, the Claimant herself had acted on the basis that the Policy was the governing rules. She applied for FOC ticket for her husband in her letter of 22 October 2001. Under the conditions of service, she would not be entitled to do so since she had not completed 10 years of service (see Clause 17(B) of the conditions). Under the Policy, FOC would be granted to a spouse after a staff had completed 12 months continuous service.

10. I therefore hold that insofar as travel benefit is concerned, the Conditions of Service had been replaced by the Policy and the crucial issues are whether FOC ticket was a contractual entitlement accrued to a staff under the 1997 Policy and whether the Defendant could invalidate such accrued benefit upon the dismissal of the Claimant. These issues are not within the scope of the original ground of appeal. But Mr Ng had addressed this court on the construction of the Policy in his oral submissions and it is obvious to this court that these issues had to be resolved in order to do justice to the parties.

11. The court invited further submissions from the parties and the appeal was restored for hearing on 13 April 2004. On that day, Mr Ng sought leave to argue further grounds of appeal foreshadowed in his Further Submissions filed on 31 December 2003. The Defendant was given ample notice of such application and it would not suffer any prejudice that cannot be compensated by an order for costs if these grounds were entertained. In the exercise of my discretion under Rule 9(2) of the Labour Tribunal (General) Rules, I allowed these further grounds to be canvassed and I have heard parties on the same. The additional grounds are as follows,

" (2) The learned Presiding Officer was wrong in law in:

(a) that she construed the 1995 Policy as not applicable to teminees;

(b) holding that the free of charge ticket(s) benefit was not a right;

(c) her holding that if the free of charge ticket(s) benefit was not a right, the Defendant could make their own decision.

(3) The learned Presiding Officer erred in law in that she failed to investigate and find that the 1995 Policy was void contrary to section 70 of the Employment Ordinance Cap.57."

For reasons mentioned above, I will deal with these by reference to the 1997 Policy instead of the 1995 Policy.

12. Before I deal with the additional grounds, I would sidetrack a little bit to refer to the jurisdiction of the Labour Tribunal in hearing claims relating to the FOC tickets. Mr Ng characterized the same as a claim for damages for breach of the contract of employment and as such falling within Paragraph 1 (a) of the Schedule to the Labour Tribunal Ordinance. He relied on the decision of Hunter J in Panalpina (Hong Kong) Ltd v Ulrich Haldemann [1983] HKLR 275 (followed by Deputy Judge Sharwood in Ireland v Canton Fitzgerald (HK) Ltd [1988] HKC 493).

13. Mr McLeish agreed that the Labour Tribunal did have jurisdiction to entertain the claim and he did not dissent from the analysis of Hunter J. He however submitted that there were complicated issues in term of assessment of the quantum and if this court were with the Claimant as to the merits of the appeal, the matter should be remitted to the District Court instead of the Labour Tribunal.

14. For my part, I would respectfully adopt the approach of Hunter J and held that the FOC ticket claim is within the jurisdiction of the Labour Tribunal.

15. Turning to the additional grounds of appeal, in my judgment the most important questions are what is the nature of the benefit conferred under the 1997 Policy and when did such benefit accrue. Although Mr McLeish argued forcefully that the provisions in the 1997 Policy did not confer any benefit or privilege on an employee whose contract of employment had been terminated by the Defendant (referred to as a "terminee" in counsel's submissions), I think that is a red herring. The Claimant's case is not premised upon asserting a right to FOC ticket being accrued to a terminee. Rather her case is that her right to FOC tickets had been accrued prior to the termination of her employment. Hence, it is neither here nor there that there is no provision granting any travel concession to any terminee under the 1997 Policy.

16. Mr McLeish advanced a variation of this contention. He submitted that whatever benefit accrued to an employee under the 1997 Policy was conditional upon the employee remained as a serving employee at the time of travel. The only exception to this is the case of an employee who had resigned. There were express provisions under Clause 11 reproduced above to cater for that situation. An employee who had resigned was given 30 days to utilize the FOC ticket. Mr McLeish submitted that a terminee could not be in a better position than such an employee.

17. On the other hand, Mr Ng contended that there could be many cases where the employment contracts are terminated by the Defendant without any fault on the part of the employees. It would be wrong to assume that a terminee should be worse off than an employee who had resigned.

18. There is no express provision in the 1997 Policy stipulating that any benefit accrued to an employee would be forfeited upon his or her employment being terminated by the Defendant. I do not think Clause 11 by itself necessarily carries such an implication. However, that is not the end of the matter. Even assuming (without deciding) that the 1997 Policy did confer some contractual benefits on the Claimant, one must consider the nature of such benefits.

19. As far as FOC ticket is concerned, the following features should be noted,

(a) The actual benefit is the travel instead of the ticket: it is clearly provided under Clause 1 of the 1997 Policy that travel concessions are for leave and recreational purposes only and they are personal and not transferable. The same was reiterated in Clause 5 under the heading "Ticketing". Hence, an employee could not sell or transfer his or her ticket to others. There is a time limit for the validity of the ticket. If expired, it has no value to the employee. Clause 8 stipulates that there could not be any refund for unused Flown coupon which is the prescribed type of ticket for FOC ticket.

(b) The benefit is more in the nature of a fringe benefit than part of the remuneration of an employee: it could not be exchanged for cash, an employee who does not wish to travel or who fails to issue a ticket within time or utilizes the same before its expiry could not derive any actual benefit from it.

(c) The Flown ticket has to be used together with a CX ID card or Staff Services Card, see Clause 9. Hence, an employee whose contract had been terminated, consequently with his or her Staff Card surrendered, could not enjoy the benefit.

20. Looking the matter in that light, although there are provisions in the 1997 Policy suggesting that the FOC tickets "accrued" annually on 1st January of each calendar year, as in the case of other fringe benefits like use of company cars or other company facilities, it is somewhat illusory to talk about accrual of rights. So long as one remains as an employee, he or she can enjoy the fringe benefit. But once the employment relationship is terminated, unless there are special provisions catering for the same (as in the case of resignation), an ex-employee could not claim back what he had not enjoyed in the past although he had an outstanding "accrued" entitlement whilst he was employed.

21. In a way, the FOC ticket might have distorted one's perception about the true nature of the Claimant's entitlement under the 1997 Policy. On true analysis, it is nothing more than a mere booking form. It cannot be compared with a commercial air ticket.

22. Hence, it does not matter whether the entitlement to FOC ticket is a contractual benefit. Even if it is, the very nature of the benefit, as prescribed by the terms of the 1997 Policy, is a benefit that can only be enjoyed during the subsistence of the employment. Once the employment of the Claimant was determined by the Defendant, she had no further right to use the ticket.

23. Therefore, it is not necessary for me to decide whether the entitlement is a contractual right instead of mere privilege. I can see arguments both ways in that regard and I would prefer to leave the point open. Nor do I need to consider the question of discretionary element on the part of the Defendant in withholding the benefit upon termination of employment. On proper construction, the 1997 Policy did not give the Claimant any right to enjoy FOC travel after the termination of her employment by the Defendant. The discretion of the Defendant was simply not engaged. The appeal therefore cannot succeed on the basis of Ground (2).

24. As regards Section 70 of the Employment Ordinance, given the limitation imposed by Clause 11 on the use his or her outstanding FOC entitlement by an employee who resigned, I agree with Mr McLeish's submission that it is too remote to suggest that the difference in treatment of an employee who resigned as compared with that of an employee whose employment was terminated by the Defendant under the 1997 Policy would drive an employee to opt for resignation instead of being dismissed on notice. Hence, the Claimant cannot rely on Section 70 to contend that the 1997 Policy was void by reason of it purporting to extinguish or reduce the right of an employee to long service payment.

25. This appeal is therefore dismissed. I also make an order nisi that the Claimant shall pay the Defendant's costs of the appeal.