THOMAS VINCENT v. SOUTH CHINA MORNING POST PUBLISHERS LTD

CACV 253/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 253 OF 2002

(ON APPEAL FROM HCA No. 6233 of 1999)

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JUDGMENT

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Hon Yuen JA:

1. This is an appeal by the Defendant from a judgment of Deputy Judge Muttrie given on 2 May 2002 awarding the Plaintiff (a former employee of the Defendant) a total sum of $171,426.70, with interest from the date of the dismissal until payment at the judgment rate, and costs.

Background

2. The Plaintiff, a journalist, was employed by the Defendant, publishers of the South China Morning Post newspaper ("SCMP"), on 1 February 1994. After a probationary period, he was employed as a sports sub-editor on a continuous contract determinable on one month's notice from either party. The contract of employment was subject to terms contained in a booklet entitled "Staff Regulations & Conditions of Service".

3. In 1996, the Plaintiff became the editor of "Premier Soccer", a magazine supplement to the Friday edition of the SCMP.

Licensing agreement

4. Before 14 November 1998, the Defendant had a licensing agreement with Times Newspapers Ltd, the publishers of The Times and The Sunday Times, for the reproduction of materials from those newspapers. It was a term of the licensing agreement that the Defendant would

"ensure that it ... shall make acknowledgment to The Times or The Sunday Times, London newspaper as appropriate copyright owners of such matter in all editions in which the matter is printed or otherwise reproduced".

5. This agreement was however terminated on 14 November 1998. On 27 November 1998, Jonathan Fenby, then the Editor of the SCMP, sent an internal e-mail to the Plaintiff to inform him of the termination of the licensing agreement. The e-mail said, amongst other things,

"we've stopped the times and Sunday times news services so you shouldn't pick up copy for premier soccer ... for the moment we're not entitled to use materials from times/Sunday times".

The Plaintiff read the e-mail on 29 November 1998.

Premier Soccer article

6. Six days later however, in the 4 December 1998 edition of Premier Soccer, there was published as the centre-spread an article which, the judge found, contained "substantial portions ... copied directly" from an article written by the British sports writer Hugh McIlvanney which had been published in The Sunday Times on 29 November 1998. The article appeared under the Plaintiff's byline only and contained no acknowledgement of copyright or other attribution.

Correspondence between the Editor and the Plaintiff

7. This came to the Editor's notice and on 7 December 1998, he wrote to the Plaintiff expressing his shock that so much of the article had been lifted directly from The Sunday Times for the Premier Soccer article. The letter also said:

"This raises very serious professional, ethical and legal questions. It is a clear case of copyright infringement despite my message to you. It is also a clear case of plagiarism on a large scale. This newspaper cannot condone either.

I would be grateful to know if there is any explanation for what happened before I decide what action to take".

8. On 9 December 1998, the Plaintiff replied to the Editor saying that he was "somewhat mystified" by his letter. He sought to explain the use of The Sunday Times article by saying that there was no other available material that week and said that he had discussed the matter with a colleague Stan James. He also sought to analyse The Sunday Times article and the Premier Soccer article. He did not deny the Editor's assertion that around 1,500 words had been lifted directly from the Sunday Times, but commented that the original article ran to 1,600 words whereas the Premier Soccer article contained 1,790 words. He wrote:

"I considered the work [the Premier Soccer article] to be a comprehensive reworking of source material, hence the use of my byline, and not, as you contend, copyright infringement or 'plagiarism on a large scale'"

He did however indicate that he would desist from using Times copy as source material in the future, noted the Editor' s concern over copyright and said that he would be "vigilant to that issue in the future".

9. The Plaintiff's response led to a letter from the Editor two days later. In this letter, the Editor stated that the Plaintiff's response showed that he had different standards from those adopted at the newspaper, did not recognise basic points of journalistic ethics and standards and ignored a specific editorial instruction. The Plaintiff's failure to recognise that he had infringed copyright and plagiarized on a large scale was further cause for concern.

Termination of Plaintiff's employment

10. The Plaintiff was replaced as editor of Premier Soccer with immediate effect and was given one month's notice terminating his employment. He was not dismissed summarily under the provisions of s.9 Employment Ordinance, cap.57.

11. The Plaintiff's employment was thus terminated on 10 January 1999. This was 3 weeks short of the 5th anniversary of his employment.

Proceedings

12. The Plaintiff issued proceedings against the Defendant in the Labour Tribunal. The proceedings were then transferred to the High Court pursuant to s.10(2) of the Labour Tribunal Ordinance, cap. 25. Apparently, this was the first case where the ambit of Part VIA of the Employment Ordinance, which was enacted in 1997, fell to be considered by the court.

13. The effect of the transfer is that the present appeal is an appeal from the Court of First Instance of the High Court, not from the Labour Tribunal. Consequently, Part VI of the Labour Tribunal Ordinance, which restricts appeals from the Labour Tribunal to errors on points of law, does not apply to this appeal and this Court has all the powers of the Court of Appeal set out in Order 59 rules 10 and 11 of the Rules of the High Court.

Plaintiff's claims

14. The Plaintiff's amended Statement of Claim pleaded that "the dismissal was wrongful and unreasonable". I will examine the use of these terms in the context of the Employment Ordinance later in this judgment.

15. The Plaintiff claimed "long service payment" of $75,000, "end of year payment" of 6 weeks (alternatively 8 weeks) salary, unspecified damages for loss of pension rights and unspecified additional damages on the basis that "in its unreasonable and wrongful dismissal of the Plaintiff, the Defendant acted in breach of the mutual obligation of trust and confidence owed to him when it failed to adopt the normal and/or a fair process of disciplinary action".

16. The amended Statement of Claim failed to plead any statutory provisions at all (a claim for compensation specifically under s.32P of the Employment Ordinance having been deleted by amendment), but by the commencement of the trial, it became clear that the Plaintiff was claiming that he was entitled to:

(a)	wages, long-service payment and pension rights, under the provisions of Part VIA of the Employment Ordinance;
(b)	an end of year payment, under the terms of his contract of employment; and
(c)	damages, under the implied obligation of good faith in employment contracts established in Malik v Bank of Credit and Commerce International SA [1998] AC 20.

Judge's findings

17. In his witness statement and at trial, the Plaintiff admitted that he was guilty of plagiarism and had infringed copyright. After trial at which the judge saw and heard some of the witnesses who had given statements, the judge rejected the Plaintiff's case that there was no other available material which he could have used at the time. The judge also did not accept the Plaintiff's case that Stan James, who was in any event not in a supervisory position over the Plaintiff, had allowed the Plaintiff to plagiarize. He found that the Plaintiff's actions amounted to disobedience of a general instruction and he rejected the Plaintiff's case that plagiarization was commonplace at the SCMP and was condoned.

18. The judge described what the Plaintiff did as amounting to serious, or grave, professional misconduct for a journalist. There is no challenge by the Plaintiff to the judge's findings of fact against him.

Other considerations

19. However, the judge noted that it was a first offence, the Plaintiff had promised to be vigilant about copyright in the future, there was no "formal disciplinary process", the offence had caused no actual loss to the Defendant, the Plaintiff was close to completing the qualifying period for a long service payment (under Part VB of the Employment Ordinance) and the Editor had not taken that into consideration when he decided to terminate the Plaintiff's employment.

Judgment

20. In considering the parties' rights and duties under the statutory scheme, the judge compared the Hong Kong legislation in respect of employment protection in Part VIA of the Employment Ordinance with the English legislation in respect of unfair dismissal in Part X of the Employment Rights Act 1996.

21. Whilst noting that the two pieces of legislation were different, he adopted the concept of "the band of reasonable responses which a reasonable employer might have adopted" in his construction of s.32K of the Employment Ordinance (an aspect that will be considered later in this judgment), as he held that "it is difficult to see how a reason for dismissal on the ground of conduct could be a valid one if it did not come within the band of reasonable responses which a reasonable employer might have adopted" .

22. In conclusion at paragraph 49 of the Judgment, the judge held:

"my own reaction is that the more reasonable course would have been to give the plaintiff a warning. ... I do not think that dismissal was one of the reasonable responses open to a reasonable employer in the circumstances".

He took the view that since the Editor had not known that the Plaintiff was a few weeks short of the 5th anniversary of his employment and had therefore not taken that into consideration when deciding to terminate the Plaintiff's employment,

"even if dismissal was a reasonable response in the context of a first offence which caused no loss, which I do not think it was, it seems to me that this flawed decision means that in any event I must find that the defendant has not shown a valid reason for the dismissal of the plaintiff".

23. The judge ordered the Defendant to pay the Plaintiff:-

(a)	terminal payments under s.32O Employment Ordinance, comprising:
(i)	wages for 3 weeks
	(to take the Plaintiff to the 5th anniversary of his employment, the judge having taken the view that s.32O(3)(a) Employment Ordinance permitted the making of such an  award)	$29,670
(ii)	long service payment
	(which would have been $75,000 at the 5th anniversary, but giving credit for $109,844.91 agreed as gratuities and benefits received and deducted under s.31Y Employment Ordinance)	$0
(iii)	reduction of pension payment
	(which would have been $247,250 at the 5th anniversary, but giving credit for $184,613.30 received, the judge having taken the view that s.32O(3)(e) Employment Ordinance permitted the making of such an award)	$62,636.70
(b)	end of year payment as the Plaintiff's contractual entitlement (pursuant to Regulation 8 of the Staff Regulations and Conditions of Service)	$79,120

24. The judge dismissed the Plaintiff's claim to Malik damages. The Plaintiff did not lodge a cross-appeal.

Appeal

25. The Defendant appealed against the judge's awards of the statutory terminal payments as well as of the contractual end of year payment.

Statutory Scheme

26. As the judge had characterized the Hong Kong statutory scheme as being "somewhat uncertain", I hope I may be forgiven for attempting the following analysis in some detail.

Termination of contracts of employment

27. Part II of the Employment Ordinance sets out the rights of employers and employees in relation to the duration of contracts of employment.

28. Sections 9 and 10 deal with the right of both parties to the contract of employment to terminate it without notice (or payment in lieu). Section 9 gives the employer the right to terminate the employment of the employee without notice (or payment in lieu) in what generally used to be called "summary dismissal" situations, which include misconduct by an employee which is inconsistent with the due and faithful discharge of his duties. Section 10 gives the employee the right to terminate his employment without notice (or payment in lieu) in circumstances including physical or medical grounds.

29. Section 6 gives both the employer and the employee the right to terminate the contract of employment by giving notice to the other party, while section 7 gives them both the right to terminate the contract of employment by payment of wages in lieu of notice.

Not "wrongful" termination of contract

30. Section 8A is entitled "damages for wrongful termination of contract". It deals with cases where a party has terminated the contract of employment without notice or payment in lieu, where notice or payment in lieu was required.

31. This is the only situation in the Employment Ordinance which is referred to as a "wrongful" termination of a contract of employment.

32. As one month's notice was given by the Defendant to the Plaintiff in the present case, it is clear that there was no "wrongful" termination of the contract of employment within the meaning of the Employment Ordinance, and the Plaintiff's pleading of a "wrongful" dismissal was presumably simply the loose use of statutory language.

33. Similarly, when the judge asked the question "was the dismissal wrongful and unreasonable under Part VIA of the Employment Ordinance and if so what damages flow from that?", presumably he did not intend to add any features extraneous to Part VIA.

34. Going then to Part VIA, by way of introduction it is pertinent to refer first to Part VB of the Employment Ordinance which provides for employees' rights to long service payment.

Long service payments

35. Briefly, Part VB provides that if a person has been employed for at least 5 years and the contract of employment is terminated (whether by the employer or by the employee), the employer is required to pay the employee a long service payment [s.31R(1)].

36. This is so unless the employee has been dismissed "summarily" (i.e. under s.9 Employment Ordinance) in which event he would not be entitled to long service payment [s.31S(1)]. There are also specific exceptions for termination of the contract of employment due to redundancy [s.31R(1)(a)(i)] or medical grounds [s.31R(1)(a)(ii)], which do not apply in the present case.

37. Therefore, even in situations where the employer has given the employee notice or wages in lieu, or even where it was the employee's own decision to leave (if he was aged 65 or above), the employer is obliged to pay long service payment, which is calculated at a percentage of the employee's wages (subject to a maximum of $15,000) for every year of service (subject to a maximum sum set by statute).

38. However, as noted above, the employee does not qualify for long service payment unless he has been employed under a continuous contract for at least 5 years as at the date when the notice terminating the contract expired [s.31R(1)(a) and s.2].

Employment protection - Part VIA

39. What, then, is there to stop an employer giving a month's notice to an employee during say, the 10th month of the 4th year of employment, so as to avoid an obligation to pay long service payment, a right which would have been conferred on the employee had the employer not terminated his contract, albeit with notice?

40. Part VIA, which was enacted in June 1997, aims to protect employees in such (and other similar) situations. Under this part, the Labour Tribunal (or the court to which the matter has been transferred) may grant an employee remedies (which may be reinstatement, or re-engagement, or terminal payments) in any of three situations:

(a)	where an employee has had his contract of employment terminated because the employer intends to extinguish or reduce a right conferred or to be conferred upon the employee by the Ordinance;
(b)	where an employee has had the terms of his contract of employment varied for the same purpose;
(c)	where an employee has had his contract of employment terminated in certain specific situations, such as pregnancy, or participation in trade union activities, court proceedings, etc.

41. Situation (a) is relevant to the present appeal. Section 32A(1)(a) provides:

"An employee may be granted remedies against his employer under this Part -

(a)

where he has been employed under a continuous contract for a period of not less than 24 months ... and he is dismissed by the employer because the employer intends to extinguish or reduce any right, benefit or protection conferred or to be conferred upon the employee by this Ordinance" (emphasis added)

It may be helpful at this juncture to remind oneself of some pertinent points in the statutory scheme.

Statutory scheme

42. First, although s.32A(1)(a) refers to an employee being "dismissed" by the employer, this covers situations where the contract of employment had been terminated with proper notice or payment in lieu, as provided for under the Employment Ordinance- see s.32B(2) (although a "summary" dismissal by the employer under s.9 of the Employment Ordinance is excluded).

43. Second, remedies may be granted only if the employer "intends" to extinguish or reduce rights conferred under the Ordinance, not simply when the extinguishment or reduction of rights is the natural and legal consequence of the termination.

44. Third, there is however a statutory presumption of the employer's intention. Section 32A(2) provides:

"For the purposes of subsection (1)(a), an employee who has been dismissed by the employer shall, unless a valid reason is shown for that dismissal within the meaning of section 32K, be taken to have been so dismissed because the employer intends to extinguish or reduce any right, benefit or protection conferred or to be conferred upon the employee by this Ordinance" (emphasis added).

45. Fourth, the statutory presumption may be rebutted if, but only if, the employer can show a "valid reason" for the termination of the contract of employment within the meaning of s.32K.

46. Fifth, s.32K sets out a list of reasons which the legislature recognizes as "valid" i.e. which would rebut the statutory presumption of the employer's intention when he terminated the employee's contract of employment. Section 32K provides:

"For the purposes of this Part, it shall be a valid reason for the employer to show that the dismissal of the employee ... was by the reason of -

(a)	the conduct of the employee;
(b)	the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do;
(c)	the redundancy of the employee or other genuine operational requirements of the business of the employer;
(d)	the fact that the employee or the employer or both [would contravene the law in continuing the employment];
(e)	any other reason of substance, which, in the opinion of the court or the Labour Tribunal, was sufficient cause to warrant the dismissal of the employee ..." (emphasis added).

47. Sixth, the effect of the statutory scheme is therefore simply, that there is a body of five "valid reasons" (set out in s.32K) which:

(a)	if proven by the employer, would rebut the statutory presumption that the contract of employment was terminated because the employer intended to deprive the employee of his statutory benefits;
(b)	if not proven by the employer, would result in his being deemed to have intended to deprive the employee of his statutory benefits and the termination being deemed to be unreasonable.

Section 32M provides:

"On a claim for remedies under this Part if the court or Labour Tribunal finds that the employer has not shown a valid reason as specified under section 32K, the employer is deemed to intend to extinguish or reduce any right, benefit or protection conferred or to be conferred upon the employee by this Ordinance and the dismissal or the variation is deemed to be unreasonable and the court or Labour Tribunal may make an order under section 32N or an award of terminal payments under section 32O".

48. Seventh, in determining whether the employer has discharged the burden of proving that the termination was because of any of the five "valid reasons", the court or tribunal should take the circumstances of the claim into consideration, including the employee's length of service compared with the length of qualifying service required for statutory benefits. Section 32L provides:

"(1) On a claim for remedies under this Part, in determining whether or not an employer has shown that he has a valid reason for the dismissal of the employee ... within the meaning of section 32K, the court or the Labour Tribunal shall take into consideration the circumstances of the claim.

(2) Without affecting the generality of subsection (1), the circumstances of a claim include the length of time that the employee has been employed under that contract of employment with the employer as compared to the length of qualifying service required for the right, benefit or protection conferred or to be conferred upon the employee by this Ordinance which is capable of being extinguished or reduced by means of the dismissal ...".

As a simple example, it would be more difficult for an employer to prove that an employee is not qualified for a job when he has already been employed for more than four years and is close to reaching the fifth anniversary of his employment.

Function of court or tribunal

49. The function of the court or tribunal is therefore to see whether the employer has discharged his burden of proving one of the five facts which are recognized by the legislature as valid reasons for the termination of the contract for the purposes of rebutting the statutory presumption.

No additional, discretionary consideration intended

50. With respect to the judge, I do not consider that the word "valid" imports a requirement for an additional, discretionary consideration by the court or tribunal of the "reasonableness" of the termination once one of the five facts is proved.

51. In my view, the word "valid" means no more than that whilst there may be all sorts of legitimate reasons which may have led the employer to terminate the contract which may have nothing to do with intending to deprive the employee of statutory benefits, only the five reasons in s.32K have been accepted by the legislature for the purposes of rebutting the statutory presumption. All other reasons for the termination, however legitimate, and however genuine the employer's evidence that he had no intention to deprive the employee of any statutory benefits, are not valid for the purposes of rebutting the statutory presumption.

52. It is clear from the language of the statute that if the employer proves that the termination was by reason of one of the five facts in s.32K, then the statutory presumption would be rebutted without any additional, discretionary consideration whether it was reasonable to have terminated the contract or whether there should have been a "formal disciplinary process" first. The opening words of s.32K are "it shall be a valid reason ...", not "it may be a valid reason for the employer to show that the dismissal of the employee ... was by the reason of [e.g.] the conduct of the employee ...".

53. If it had been the intention of the legislature that the court or tribunal should perform an additional, discretionary consideration of the reasonableness of the termination, then one would have expected the legislature to have set out clearly a two-stage process, adopting the legislation on unfair dismissal in Part X of the Employment Rights Act, on which part of Part VIA of the Employment Ordinance was obviously modelled.

54. Section 98 of the Employment Rights Act sets out clearly a two-stage process. In the first stage, the employer has to show that the reason for the termination is within the statutory list of reasons. If he does so, then that is a "potentially fair" reason. In the second stage, the court or tribunal then decides whether the employer acted fairly in terminating the contract for that reason. Section 98(4) provides:

"(4) where the employer has fulfilled the requirements of subsection (1) [i.e. where he has shown that the reason was within the statutory list], the determination of the question whether the dismissal is fair or unfair (having regard to the reason shown by the employer) --

(a) depends on whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee, and

(b) shall be determined in accordance with equity and the substantial merits of the case".

55. With a two-stage process so clearly expressed in this Act which was used as a model for part of Part VIA, it is unlikely that the legislature in Hong Kong would have intended, by using simply the one word "valid", to encompass the entire ambit of the second stage examination which the court or tribunal in England has to undertake when determining a claim of unfair dismissal.

Substance in decision to terminate by reason of conduct

56. One of the matters that caused the judge concern was that if all that the employer is required to prove is that the contract was terminated by reason of the "conduct" of the employee (which is one of the five valid reasons in s.32K), then any trivial conduct would entitle the employer to terminate the contract and avoid payment of the statutory benefits. That could not have been the legislature's intention. Therefore, it was concluded, even after the employer has proven one of the five facts in s.32K, the court or tribunal must make a "value judgment" to determine whether the reason is "valid".

57. In my view, it is not the law that any conduct of the employee (however trivial) would entitle the employer to terminate his employment within the meaning of s.32K (which has been set out in paragraph 46 above). The words "conduct of the employee" must be read in the context. When one reads the other reasons listed in s.32K (such as qualifications, redundancy, and legality), it is clear that they are all reasons of substance. The general reason at the end of the list is "any other reason of substance which, in the opinion of the court or the Labour Tribunal, was sufficient cause to warrant" the termination of the contract. This indicates that the conduct of the employee within the meaning of s.32K must be something factual and real, such as to give substance to the employer's decision to terminate, and not merely any act which the employer finds he does not like.

58. Trivial conduct by the employee (such as an employee wearing a loud tie, to take one of the examples suggested in argument) would not enable an employer to discharge his burden of proving a reason of substance, so as to rebut the statutory presumption. In that case, the reason for the termination would simply have been the employer's capriciousness and there would be no substance to the employer's case that he terminated the contract because of the employee's conduct.

59. What constitutes substance in any case is a factual issue to be determined objectively by the court or tribunal - taking into consideration all the circumstances of the claim (see s.32L) - in the process of deciding if the employer has discharged his burden. But once one of the reasons has been proved, it is not for the court or tribunal to embark on an additional, discretionary examination to see if it was reasonable or fair or "valid" to terminate the contract.

60. As the judge recognized, it is not for a court or tribunal to run an employer's business. The function of the court or tribunal is to determine whether there is substance in the employer's claim that he had terminated the contract for one of the five reasons in s.32K. If there is substance in the employer's case, that shows that the contract had not been terminated because the employer intended to deprive the employee of statutory benefits.

61. It may well be that in some, or even most, "conduct" cases, if a court or tribunal finds that termination of the contract "fell outside the band of reasonable responses which a reasonable employer might have adopted" (which is the test for the second stage under the English Act cf Iceland Foods v Jones [1983] ICR 17, 25), that is an indication that the conduct in question was not a reason of substance for the termination.

62. But it is important to note that there is a difference between the two-stage process under the English Act and the statutory scheme under Part VIA of the Employment Ordinance, and the court or tribunal determining a case under Part VIA should be wary of adopting wholesale case law pronounced under the English legislation. The court or tribunal should only decide if there was substance in the employer's decision to terminate the contract by reason of the employee's conduct (whether of commission or omission). It is not for the court or tribunal to step into the employer's shoes and decide that termination was (or was not) a reasonable course of action.

Plaintiff's conduct a reason of substance for termination

63. In the present case, the judge had found as a fact that the Plaintiff had been guilty of serious or grave professional misconduct in breaching Sunday Times copyright contrary to the Editor's express instructions. The judge had rejected the Plaintiff's evidence that he had approval from Mr James. It is clear from the judgment that there was therefore substance in the Defendant's case that it terminated the Plaintiff's contract because of his conduct (or misconduct).

64. In my view, with respect to the judge, that is where he should have stopped, as the Hong Kong statutory scheme did not intend that the court or tribunal should go any further. The Defendant had rebutted the statutory presumption that it had terminated the contract because it intended to deprive the Plaintiff of statutory benefits. The judge should then have dismissed the Plaintiff's case under Part VIA.

65. However, because the judge took the view that he had also to consider the "reasonableness" of the termination to see if there was a "valid" reason under s.32K, he went further, considering his "own reaction" as to what was "a more reasonable" course of action, and whethertermination was within the band of "reasonable responses", and if it was, whether it was "on the borderline".

66. Those considerations led the judge to hold that, despite the Plaintiff's misconduct which clearly gave substance to the Defendant's decision to terminate the contract, the termination was unreasonable or not "valid" and the Defendant was deemed to have terminated the Plaintiff's contract because it intended to deprive him of statutory benefits, thereby entitling him to terminal payments. With respect to the judge, for the reasons set out in the preceding sections of this judgment, the legislation does not intend the court to undertake any additional, discretionary consideration and this exercise was undertaken in error.

Assuming adoption of the test of reasonable responses

67. It would appear from the judgment and from the course of argument that the test of "the band of reasonable responses which a reasonable employer might take" had not been disputed by the parties at the trial and this might have led the judge to take the course that he did.

68. However, even if that test were to be adopted, it would appear from the judgment that, with respect to the judge, he had failed to take an important fact into account but had taken certain extraneous matters into account in reaching his decision.

69. The judge failed to take into account the fact that it was only in April 2000 that the Plaintiff accepted in his witness statement that he had plagiarized and had breached Sunday Times copyright. The attitude that the Plaintiff had maintained in his response to the Editor was that he was "mystified" by the Editor's statement that he had been in breach of copyright and insisted that he had done a comprehensive reworking of the McIlvanney article. The judge found that it was clearly not so. The judge found that the Plaintiff's response was a hollow attempt at self-justification.

70. Although the Plaintiff did promise to be more vigilant about copyright in the future, that was by no means "mea culpa" and the promise of vigilance could hardly be given any weight when he had denied what was clearly plagiarizing and said it was a "comprehensive reworking". Therefore, even assuming that the judge was justified in stepping into the Editor's shoes (which he was not), he should have considered how an editor could have taken the risk of keeping a journalist on his staff whose standards of copyright were so misconceived. That risk was not considered by the judge.

71. Further it would appear that the judge had taken into account the fact that the Plaintiff's conduct had not caused any loss to the Defendant. That was, with respect, a misdirection. The answers to questions whether there would be any actual loss to the Defendant (by reason of claims that might be made by Times Newspapers Ltd, or a consequent drop in sales) or any loss to the South China Morning Post's reputation could not have been known to the employer at the time. It is not open to a court or tribunal to declare with the benefit of hindsight that the employer's response was unreasonable. The reasonableness of the employer's decision could only be judged at the time the termination took effect (Whitbread plc v Hall [2001] IRLR 275, paragraph 17, quoting Browne-Wilkinson J (as he then was) in Sillifant v Powell Duffryn Timber Ltd [1983] IRLR 91).

72. Further, the judge held that it was incumbent on the employer to show that he (the employer) had taken into account the period of qualifying service in deciding in the circumstances whether it was "the proper course" to terminate the contract, and since the Editor had not done so, his decision was "flawed" and the termination was not reasonable. With respect to the judge, the statute makes no such demand on the employer. Section 32L(2) provides that it is when a court or tribunal has to determine whether one of the five reasons has been proved that it (the court or tribunal) should take the period of qualifying service into account.

73. For the reasons set out above, given the judge's findings of the Plaintiff's serious professional misconduct which led to the Defendant's termination of his contract, the Defendant's appeal in respect of terminal payments must be allowed.

74. Before leaving this aspect of the case, however, and as a matter of completeness, it should be noted that the judge made an award of wages for 3 weeks to take the Plaintiff to the 5th anniversary of his employment, the judge having taken the view that s.32O(3)(a) Employment Ordinance permitted him to make such an award.

75. With respect, I do not think that is right. Under the statutory scheme, if a judge finds that the employer has failed to rebut the statutory presumption, he can order reinstatement or re-engagement or the payment of terminal payments. The award of terminal payments is made on the basis that the employee's contract had been terminated. Terminal payments "refer to the statutory entitlements that the employee has not been paid and that the employee is entitled to upon the termination of the contract of employment, or that he might reasonably be expected to be entitled to upon the termination of the contract of employment had he been allowed to continue with his original employment ... to attain the minimum qualifying length of service required for the entitlements" [s32O(2)].

76. However that does not mean that the Plaintiff could be awarded wages after his contract of employment had terminated upon the expiry of the notice period, there being no order for reinstatement. This is clear from s.32O(3)(a) which provides that terminal payments include "wages ... due to the employee under his contract of employment". No wages could be due under a contract of employment after it has been terminated.

77. For the same reason, terminal payments should not be calculated as if the employee had continued with the contract of employment even after expiry of the notice period. Section 32O(4) provides that "notwithstanding that the employee has not attained the qualifying length of service required for the entitlements under this Ordinance, the court or Labour Tribunal may make an award of terminal payments under subsection (1) or (5) which shall be reckoned according to the actual length of time that the employee has been employed under that contract of employment with the employer", in other words, actual period as a proportion of the qualifying period.

Annual bonus

78. Coming now to the issue of the annual bonus, the Plaintiff claimed in the Amended Statement of Claim that he had been deprived of the end of year payment (as annual payments or annual bonuses are called in the Employment Ordinance) of 6 weeks salary (in the sum of $59,340), alternatively, 8 weeks salary (in the sum of $79,120). The annual bonus was for the calendar year 1998 and the Plaintiff had been employed by the Defendant throughout that year.

79. In the Amended Defence, the Defendant denied that the Plaintiff was contractually entitled to an end of year payment or bonus, as Clause 8 of the Staff Regulations and Conditions of Service stated that any annual staff bonus was discretionary and ex gratia.

80. At trial, it was not disputed that the annual bonus for 1998 was 8 weeks salary or that it amounted to $79,120. The issue was confined to the construction of Clause 8. The Employment Ordinance does not add anything to the discussion as Part IIA which governs end of year payments provides that "end of year payment ... does not include ... any annual bonus which is of a gratuitous nature or which is payable only at the discretion of the employer".

81. The judge found on the construction of Clause 8 that it was not an individual bonus but a class bonus, and since the Plaintiff was a member of a class to which the Defendant awarded a bonus, he was contractually entitled to the bonus.

82. Clause 8 provided:

"	(a)	The Company may award a discretionary exgratia annual Staff Bonus to those Employees who do not receive any commission on the profits of the Company or the earnings of any department as part of their remuneration.
	(b)	The Bonus, if payable, shall be paid during the month of December to all permanent Employees who were on the Staff of the Company at 1st January of the year in respect of which the bonus is awarded and who are not under notice nor have given notice as at 30th November.
	(c)	A permanent Employee not having completed twelve months' service prior to 31st December of the year in respect of which the bonus is awarded, if payable, shall be entitled to a bonus proportionate to his length of service with the Company during that year provided that he is not under notice nor has given notice as at 30th November" (emphasis added).

83. I respectfully agree with the judge that the effect of Clause 8 is that, whilst the Defendant did have a discretion whether to award a bonus for any particular year, once it had decided to award a bonus for that year, it was contractually bound to pay it to all permanent employees (who did not receive commission or earnings-linked remuneration) who had been on the staff as from 1 January of that year, except those who were under notice or who had given notice as at 30 November.

84. The words "discretionary", "ex gratia" and "if payable" in the context of Clause 8 referred to the discretionary nature of the Defendant's decision whether to award a bonus for any particular year. However, once the Defendant decided to award a bonus for that year, it is in my view clear from the words "shall be paid ... to all permanent Employees" in Clause 8(b) that each permanent employee who fulfilled the qualifications set out in that clause was contractually entitled to be paid the bonus. This view is strengthened by clause 8(c) which refers to the "entitlement" of employees to be paid a proportionate amount depending on length of service during the year.

85. As for the submission made on behalf of the Defendant that the word "all" does not appear before "those Employees" in clause 8(a), I do not think that detracts from the clear effect of clause 8(b). It would only have been clear beyond argument had the word "all" been included in clause 8(a).

86. Nor am I persuaded by the submission that the construction of a "class" bonus may produce potentially unreasonable results. It was submitted that if there was only a small minority of undeserving employees, the employer would either have to pay them a bonus even though they did not deserve it, or would have to decide not to award a bonus at all for the year, to the detriment of other deserving employees.

87. Be that as it may, a system of a "class" bonus cannot be said to be so very unreasonable that it was unlikely that the draftsman of Clause 8 could have intended such a construction. It is a management decision whether to have a system of a "class" bonus (with its advantages of equality), or to have a system of individual bonuses (with its disadvantages of charges of favouritism).

88. If the Defendant had wished to reserve for itself a discretion whether to award a bonus to each individual employee based on the merits of his performance, it would have been very easy for the draftsman of the Staff Regulations and Conditions of Service to have made that clear. Any ambiguities should of course be construed contra proferentum in favour of the employee and against the employer whose document it was.

89. Accordingly, as the Plaintiff was a permanent employee, did not receive commission or earnings-linked remuneration, had been on the staff as from 1 January 1998 and was given notice only after 30 November 1998, he was entitled under the terms of his contract of employment to receive the annual bonus once the Defendant exercised its discretion to award one for 1998. I would therefore dismiss the Defendant's appeal in this respect.

Order

90. I would therefore (1) allow the Defendant's appeal against the award of terminal payments in the total sum of $92,306.70, set aside the judgment in this sum and dismiss the Plaintiff's claim for terminal payments; (2) dismiss the Defendant's appeal against the judgment in the sum of $79,120; and (3) make an order nisi that the Plaintiff bear two-thirds of the costs of the appeal and of the hearing below. The Plaintiff's own costs should be taxed in accordance with Legal Aid Regulations.

Hon Gall J:

91. I agree.

Hon Sakhrani J:

92. I also agree.