EGNER DAVID PARKS AND OTHERS v. CATHAY PACIFIC AIRWAYS LTD AND ANOTHER

HCA 244/2014

HCA 245/2014

HCA 246/2014

HCA 247/2014

(Consolidated)

[2023] HKCFI 3126

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 244 OF 2014 (Transferred from LBTC 20 OF 2014)

ACTION NO. 245 OF 2014 (Transferred from LBTC 22 OF 2014)

ACTION NO. 246 OF 2014 (Transferred from LBTC 23 OF 2014)

ACTION NO. 247 OF 2014 (Transferred from LBTC 21 OF 2014)

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  (Consolidated pursuant to the Order of Master Levy dated 10 March 2014)

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J U D G M E N T

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A.  INTRODUCTION

1.  This is the trial on liability of the consolidated actions brought by the 1^st, 2^nd and 4^th plaintiffs (“P1”, “P2” and “P4” respectively, collectively “Ps”) against the 1^st defendant (“Cathay”) (which employs P1 and P2) and the 2^nd defendant (“NZB”) (which employs P4). The action by the 3^rd plaintiff against Cathay was dismissed by consent with no order as to costs on 30 December 2022.

2.  Cathay is a Hong Kong listed company operating the largest airline in Hong Kong. NZB is Cathay’s wholly-owned subsidiary and a basing company which employs New Zealand based aircrew officers and provides aircrew services for the parent airline. Ps are Cathay pilots. They are members of the Hong Kong Aircrew Officers Association (“HKAOA”) which is a trade union representing aircrew employed by Cathay and its basing companies. HKAOA represents the interests of flight crew, and holds discussions and negotiations with Cathay to seek agreement on terms concerning employment such as pay, promotion and so on, and to hold Cathay to terms agreed.

3.  Cathay operates aircraft that carries passengers (sometimes with freight in the aircraft “belly”) (“passenger aircraft”), and aircraft that carries freight only (“freighter aircraft”). It has two distinct groups of pilots: those who are able to operate both passenger and freighter aircraft (though they primarily operate passenger aircraft) (“Passenger Pilots” or “Passenger Captains”), and those who solely operate freighter aircraft (“Freighter-only Pilots” or “Freighter-only Captains”). These two groups of pilots are employed on different terms.[1]

4.  A Cathay pilot is qualified on a particular type of aircraft operated by Cathay. As of 2015, Cathay operated the Airbus 330 (“A330”), Airbus 340 (“A340”), Boeing 747 (“B747”, and “B744” which stands for Boeing 747-400), and Boeing 777 (“B777”). A pilot must complete a conversion course if he wants to change from operating one type of aircraft to another (at the same rank).

5.  Cathay pilots are ranked as follows in ascending order: (1) Second Officer (“SO”); (2) Junior First Officer (“JFO”); (3) First Officer (“FO”); (4) Senior First Officer (“SFO”); (5) Captain; and (6) Senior Captain. All newly recruited pilots join either at SO or FO level. The responsibilities and duties of a Captain, FO (including JFO and SFO), and SO are different.

6.  Before being promoted from one rank to the next, a pilot has to be assessed as suitable for promotion. The Command Selection Panel is responsible for assessing an FO’s suitability for upgrade to Captain. It classifies the assessed officers in one of five categories: Category A (suitable for command training), Category B (not yet suitable for command training and the Panel requires evidence of specific skill development), Category C (failed command training and will be reassessed after a year), Category D (not suitable for command training), and Category U (unassessed or unsuitable for early command). Officers who are assessed as Category A will be offered command upgrade training. The Category A status will remain valid for 18 months.

7.  There are two types of command upgrade courses: (1) “not on type” command upgrade course (long course), which is assigned to an FO who will be upgraded onto a different aircraft type after promotion to Captain, and would take longer because it involves an aircraft type conversion as well as upgrade training; and (2) “current on type” command upgrade course (short course), which is assigned to an FO who will continue to operate the same aircraft type after promotion to Captain, and would take a shorter period of time.

8.  A pilot’s seniority is fundamental to a pilot’s career progression and remuneration. A pilot’s salary and promotion are based on seniority. Cathay maintains an Aircrew Seniority List (“Seniority List”) recording each pilot’s seniority number by date of joining. The Seniority List is a common seniority list for all pilots. An officer’s seniority is determined by the date of joining, with the officer at the top of the list being the most senior. When a pilot joins another airline, he is usually placed at the bottom of that airline’s own seniority list. Pilots are thereby usually discouraged from joining another airline. A pilot’s salary tallies with his rank and seniority.

9.  The disputes herein arise out of certain provisions in the employment contracts of Cathay/NZB-employed pilots, providing for what is known as “Bypass Pay” (“BPP”). BPP is given to officers to compensate them when their promotion has been delayed by reason of Cathay retaining the next higher ranked officer beyond the normal retirement age (then at 55). A Command BPP is paid to the next most senior FO in the Seniority List suitable for promotion to Captain if Cathay retains any Captain beyond age 55. A First Officer BPP is paid to the next most senior SO in the Seniority List suitable for promotion to FO if Cathay retains any FO beyond age 55. BPP is paid in the form of salary, allowances and benefits of the rank that the most senior officer in the rank below would otherwise have been promoted to. This Court is only concerned with Command BPP in the present case.

10.  Ps make the following main claims in this action:

(1)  Command BPP claim: Ps claim that their payments of Command BPP were delayed, because Cathay/NZB had omitted to take into account Freighter-only Captains in calculating Command BPP. This also raises the issue of whether Ps’ BPP was rightly reduced or suspended by reason of their declining to undertake upgrade training courses: in particular, whether Ps had “declined” to undertake a course when they refused to take up the earliest one offered to them, or they only “deferred” taking the course.

(2)  Missed Pay Steps claim: Ps claim that their BPP should have included annual salary increments every year from the date on which BPP first became payable to them, and they should have retained those pay steps upon actual promotion to the higher rank.

(3)  Promotion Delay claim: Ps claim that their promotion to Captain was delayed because of the recruitment of Direct Entry First Officers (“DEFOs”) and Freighter-only DEFOs (Rapid Command) from other airlines in January 2008. Freighter-only DEFOs (Rapid Command) are pilots who joined Cathay as DEFOs to be rapidly promoted to the rank of Captain, who would fly only freighter aircraft.

(4)  Seniority Order claim: Ps claim that Cathay failed to adhere to the Seniority List in offering command training or upgrade training (and consequent promotion).

11.  Cathay/NZB respond, in summary, as follows:

(1)  As to the Command BPP claim:

(a)  On a proper construction of the relevant provisions in the employment contract, there is no requirement for Cathay to take into account retention of Freighter-only Captains beyond retirement age in calculating BPP for Passenger Pilots.

(b)  In any event, Ps have all declined to undertake command training, in that P1 and P2 declined to bid for any freighter command vacancies and P4 declined to accept such a vacancy. This disentitled them to BPP. Ps cannot decline freighter command positions and claim compensation for other people taking them up. That could not be the true construction of the employment contract.

(2)  As to the Missed Pay Steps claim, payment of BPP is not an actual or deemed promotion. The annual salary increments are only payable “on promotion”, and subject to “satisfactory service” at the higher rank, rather than being automatically payable.

(3)  As to the Promotion Delay claim, Ps’ promotion was not delayed by the outside recruitment of DEFOs and Freighter-only DEFOs (Rapid Command). Prior to such recruitment, the relevant freighter-only positions had been advertised internally but Ps declined to bid for or take up such positions. In any event, Ps were promoted to FOs before 2008, and therefore their promotions could not have been affected by the outside recruitment of DEFOs and Freighter-only DEFOs (Rapid Command) in 2008 who ranked below them on the Seniority List.

(4)  As to the Seniority Order claim, Cathay had no obligation to adhere to the Seniority List in offering command training to FOs, still less in their actual promotion. The offering of command training and promotion is not just dependent on seniority, but also on the following matters:

(a)  the FO’s completion of the pre-command operation knowledge assessment;

(b)  the FO’s classification as Category A (suitable for command) by the Command Selection Panel;

(c)  decision of the Command Selection Panel that the FO is suitable for command upgrade; and

(d)  availability of the command training course chosen by the FO.

12.  NZB also counterclaims against P4 for restitution of the sum of NZD65,693.56 which it claimed to have overpaid to P4 as Command BPP in the mistaken belief that P4 was contractually entitled to the same. On day 2 of the trial (8 February 2023) when Mr Bernard Man SC (appearing for Cathay/NZB)[2] started his oral opening, he sought leave from the Court (which I granted) to withdraw NZB’s counterclaim against P4. NZB does not resist paying costs of the counterclaim to P4. Mr Chua Guan-hock SC (appearing for Ps)[3] asked for costs on an indemnity basis. After hearing counsel’s oral arguments and receiving their separate costs submissions at trial, I reserved my decision on the scale of costs to be dealt with in this Judgment.

B.  BACKGROUND FACTS

B.1  Cathay’s history of freighter crewing

13.  Prior to 1995, all Cathay officers could operate both passenger and freighter aircraft. There was no distinction between Passenger Pilots and Freighter-only Pilots. At that time, BPP existed, but very few pilots were entitled to it as there were very few Captains who were extended beyond retirement age.

14.  In 1995, Aircrew Services Limited (“ASL”) was incorporated as a wholly-owned subsidiary of Cathay to provide aircrew services to Cathay. All pilots employed by ASL were Freighter-only Pilots, and they were paid less than pilots employed by Cathay.

15.  In late 1998 / early 1999, Cathay and HKAOA commenced negotiations on, amongst other matters, a new set of Conditions of Service and integration of freighter crewing. The number one item on HKAOA’s agenda was to eliminate the use of ASL to employ Freighter-only Pilots and to “return” the freighter flying jobs to Cathay pilots. At the time, Passenger Pilots of Cathay and Freighter-only Pilots of ASL were reluctant to fly with each other for political and industrial reasons, and there was animosity between them. Cathay was reluctant to cease using ASL as it had to keep the freighter operation cost down.

16.  Cathay Pacific Aircrew – Conditions of Service (1999) (“CPA COS-99”) came into effect on 1 July 1999. The provisions of CPA COS-99 were agreed as between Cathay and HKAOA. Mr Chua emphasizes that the evidence showed CPA COS-99 had come about after very “tense” and “difficult” negotiations between Cathay and HKAOA, and may not have covered all the areas which the two entities had wished to cover.

17.  Insofar as freighter crewing was concerned, Cathay and HKAOA reached an agreement in principle as contained in a “Memorandum of Understanding of Freighter Crewing” (“MOU”). The MOU reflected principles agreed during negotiations between 23 March and 10 June 1999, and provided, inter alia, that:

(1)  ASL will be gradually phased out and freighter aircraft will be crewed on a “Junior Fleet” basis using volunteers from the Seniority List.

(2)  The current cost of the freighter operation must be broadly maintained. Specifically, the salary scales for the freighter fleet will be in line with the current freighter salary scales.

(3)  No later than 31 August 1999, a Working Group consisting of representatives from Cathay, HKAOA and ASL will be formed to work on detailed arrangements for the introduction of the “Junior Fleet”.

(4)  With immediate effect, the recruitment of Direct Entry Captains to freighter fleet will cease. No later than 1 January 2000, the direct recruitment of all ASL pilots will cease, and thereupon all freighter FO vacancies and one in every four command vacancies will be offered to volunteers from the Seniority List in seniority order.

18.  CPA COS-99 did not contain provision for integration of freighter flying as the detailed mechanism had not yet been agreed.

19.  In November 1999, Cathay and HKAOA agreed in principle to the integration of ASL freighter pilots into the Seniority List.

20.  On 1 January 2000, the Freighter Aircraft Crewing Agreement 1999 (“FACA”) was signed by, inter alia, HKAOA, Cathay and ASL. An annex titled “Freighter Aircraft Crewing” (“FACA Annex”) was separately appended to the Conditions of Service for officers who joined Cathay on or after 1 January 2000, and officers who joined NZB on or after 1 July 2002. It forms part of the employment contracts which Ps entered into.

21.  The FACA and FACA Annex contain provisions to the effect that the agreements will remain valid for so long as pilots are employed by ASL and/or Aircrew Services (USA) Limited, and were intended to have a limited period of validity. During the negotiations in the late 1990s, Cathay and HKAOA had not discussed the arrangements on freighter crewing upon expiry of the FACA.

22.  The FACA and FACA Annex were drafted to facilitate the gradual integration of freighter crewing using officers on the Seniority List. The FACA allowed for the voluntary transfer of ASL pilots who had not reached their 55^th birthday on or before 31 December 1999 to employment with Cathay or one of its basing companies with effect from 1 January 2000. Those ASL pilots who chose to join Cathay were placed at the end of the Seniority List as it existed on 31 December 1999. They may continue solely to operate freighter aircraft but may also bid to operate passenger aircraft when they reach sufficient seniority. ASL pilots who chose not to join Cathay remained employed by ASL and were not incorporated into the Seniority List.

23.  In accordance with the FACA, ASL ceased to recruit pilots from 31 December 1999 onwards.

24.  Ps commenced their employment with Cathay after 1 January 2000. Their career progression is set out below. When Ps signed their respective Conditions of Service, the FACA Annex was appended to them and formed part of their employment terms.

25.  At the time when each of Ps entered into their employment contracts, there was a distinction between Passenger Pilots and Freighter-only Pilots, including in the following respects:

(1)  Freighter-only Pilots only operated freighter aircrafts, but Passenger Pilots could operate both freighter and passenger aircrafts.

(2)  Freighter-only Pilots had to bid to operate passenger aircrafts and Passenger Pilots had to bid to operate solely on freighter aircrafts.

(3)  Freighter-only Pilots and Passenger Pilots had different salary scales. The Freighter-only Pilot salary scale was lower than the Passenger Pilot salary scale.

(4)  Freighter-only Pilots did not benefit from any BPP.

(5)  The basing arrangements for Freighter-only Pilots and Passenger Pilots were different and governed by different provisions. Freighter-only Pilots could only bid for a base vacancy in designated freighter base areas, which were more limited than bases open to Passenger Pilots.

26.  In 2007, Cathay planned to introduce a new set of Conditions of Service, namely CPA COS-08, and extend the normal retirement age from 55 under CPA COS-99 to 65. It therefore no longer made sense to maintain a separate company in the form of ASL to crew freighter aircrafts. In late 2007, Cathay offered to the remaining ASL Freight-only Pilots an opportunity to join Cathay or one of its basing companies effective 1 January 2008.

27.  Both HKAOA and Cathay understood that there would be in place a negotiated revision to CPA COS-99 to ensure that the fundamental elements of the FACA would be integrated and properly constituted into the employment contracts upon expiry of the FACA and FACA Annex. Although Cathay and HKAOA negotiating committees agreed in principle on the issues of integrating the remaining ASL pilots into Cathay in 2007, the agreement was not ratified by the General Committee of HKAOA.

28.  On 13 December 2007, HKAOA wrote to Cathay asking that BPP should be paid to the eligible officers in the event of retention of any Captain beyond the retirement age, and that Cathay should align the pay scale of Passenger Pilots and Freighter-only Pilots.

29.  On 14 December 2007, Mr Nick Rhodes (Cathay’s then Director Flight Operations) wrote to HKAOA stating that: (1) although the FACA would expire from 1 January 2008, the “Junior Fleet” is a long-term concept and the suggestion of abandoning the Freighter pay scale is contrary to that agreed concept; and (2) with effect from 1 January 2008, the integration will finally be complete, and the freighter aircraft will be crewed 100% by pilots on the Seniority List.

30.  On 17 December 2007, Mr Rhodes wrote to HKAOA stating that although CPA COS-99 expressly provides that an Officer who had declined to undertake a command training course would not be eligible for BPP, it was Cathay’s intention to treat the Officer as remaining eligible in respect of appointment on passenger aircraft notwithstanding he had declined to take up a freighter position.

31.  Cathay offered the remaining ASL Freighter-only Pilots the opportunity to join Cathay effective 1 January 2008. Before Cathay did so, it advertised all the corresponding freighter vacancies internally to Cathay pilots, so any eligible Cathay pilot who wished to bid for these vacancies would have been awarded the position ahead of any officers recruited from ASL. All 43 of those remaining ASL Freighter-only Pilots accepted the offer and joined Cathay. 37 of them (who had been ASL Captains) joined Cathay as DEFOs (Rapid Command), as FOs to be rapidly upgraded to Captain, to operate only freighter aircraft. The remaining 6 (who had been ASL pilots) joined as DEFOs who were paid on Unified FO Scale and could operate either passenger or freighter aircraft. All these 43 ASL pilots joined Cathay on 1 January 2008. The FACA expired in accordance with its terms because ASL had ceased to employ any pilots. The FACA Annex also ceased to have effect.

32.  Further negotiations between Cathay and HKAOA for the replacement of the FACA were unsuccessful. Cathay introduced the “Policy on Crewing Freighter Aircraft – 2008” (“2008 Policy”), which became effective on 1 January 2008, and aimed to address issues on freighter crewing which were still relevant post-2008. Of relevance is clause 9 of the 2008 Policy which provides as follows:

“Officers who are not eligible for, do not bid for or do not accept a vacancy solely operating Freighter Aircraft will not be eligible to receive Bypass Pay as a result of appointments on Freighter Aircraft. However, Officers who decline to accept an offered Command vacancy solely operating Freighter Aircraft will not be deemed to have declined Command and will remain eligible for Passenger Bypass Pay in accordance with the Officer’s CoS.”

33.  Upon expiry of the FACA and FACA Annex on 1 January 2008:

(1)  The distinction between Passenger and Freighter-only Pilots set out in [25] above still remained.

(2)  There was only one common Seniority List for all pilots.

(3)  All Cathay Passenger Pilots could be required to operate both passenger and freighter aircraft.

(4)  Cathay had the right to direct Passenger Pilots to operate freighter aircraft.

B.2  Cathay’s employment of DEFOs

34.  During 2008, Cathay recruited a total of another 223 pilots (in addition to the 43 from ASL who joined on 1 January 2008) from other airlines:

(1)  69 from Dragonair who joined on 1 July 2008, of which 31 joined as Freighter-only DEFOs (Rapid Command) and 38 joined as DEFOs.

(2)  154 from Oasis Hong Kong Airline and other sources, of which 36 joined as Freighter-only DEFOs (Rapid Command) and 118 joined as DEFOs.

35.  The hiring of Freighter-only DEFOs (Rapid Command) consisted of hiring very experienced pilots (many of whom were previously Captains) as FOs, to be rapidly promoted to the position of Freighter-only Captain. Before they were hired, Cathay had advertised the freighter vacancies internally, but there was an insufficient number of Cathay officers who bid for such vacancies.

B.3  Career progression of P1

36.  On 2 October 2000, P1 commenced employment with Cathay as SO on the B744. On 2 April 2003, P1 was promoted to JFO on the A330. On 24 February 2004, P1 was promoted to FO. On 22 August 2005, P1 undertook a B744 conversion course.

37.  On 14 March 2011, P1 started to receive Command BPP.

38.  P1 was due for command upgrade on passenger aircraft in seniority order in December 2011. He was selected for assessment for upgrade by the Command Selection Panel on 6 December 2011, in accordance with seniority order. On that occasion, the Command Selection Panel assessed P1 as Category U (i.e. unassessed), with the remarks “No “T” sims. Roster 3 sims. Review Feb 12. Noted CP 747 comments regarding 10.2.10 ALC.” This was because P1 failed an annual line check (short-hand as “ALC”) (which is an annual assessment to verify a pilot’s command proficiency) on 10 February 2010. The Panel therefore required rostering of 3 command skills training modules in the simulator (short-hand as “Sim”) for P1, and recommended a review for suitability for upgrade again in February 2012.

39.  P1 was originally scheduled for a T1 Sim in April 2011. Through no fault of P1, this was subsequently cancelled by Cathay. It was not uncommon for simulator sessions to be cancelled for operational needs or other reasons. As Mr Denly Hau (Cathay’s Flight Crew Service Delivery Manager) explained, possible reasons for cancellation include: (a) instructor being ill; (b) trainee being ill; (c) simulator break-down; (d) roster disruption – the trainee could not return to Hong Kong on time; and (e) typhoon.

40.  In November and December 2011, P1 was scheduled another T1 Sim. Both were cancelled.

41.  As a result of the cancellation of the rescheduled T1 Sim, P1’s T2 Sim originally scheduled for December 2011 was also cancelled, T1 being a pre-requisite for T2.

42.  On 7 February 2012, P1 was assessed by the Command Selection Panel again and assessed as Category U, with the remarks “Awaiting CST2. Review Mar 12.” This referred to P1 awaiting his second command skills training in the simulator (“CST2”), and the Panel recommended that P1’s suitability be reviewed in March 2012.

43.  P1 was again assessed by the Command Selection Panel on 6 March 2012. He was assessed as Category A on that occasion, meaning he was suitable for command upgrade training.

44.  On 13 March 2012, Mr Denly Hau (then Cathay’s Flight Crew Personnel Manager) wrote to P1 to advise him of the earliest command upgrade training courses, being:

(1)  an A330 “not on type” course commencing on 8 May 2012;

(2)  a B744 “current on type” course commencing on 5 June 2012; and

(3)  a B777 “not on type” course commencing in 2013.

45.  P1 chose the B744 “current on type” course. Cathay’s position is that for an FO who declines to undertake a command upgrade training course, his/her eligibility for Command BPP would cease for the period between the start date of the training course he declined and the date before the commencement date of the training course he accepted. As a result of P1’s choice, Cathay suspended payment of BPP to P1 from 8 May 2012 to 5 June 2012 (8 May 2012 being the date of the A330 “not current on type” course offered to P1, and 5 June 2012 being the date of the B744 “current on type” course chosen by P1). On 5 June 2012, when P1 started his command training, he was paid Command BPP again.

46.  On 26 August 2012, P1 was promoted to Captain on Probation, and ceased to receive BPP on that date.

47.  On 26 February 2013, P1 was promoted to Captain. On 1 October 2020, he was promoted to Senior Captain and employed on US terms instead of CPA COS-99, which do not provide for BPP. P1 resigned and left Cathay on 18 August 2022. He joined American Airlines subsequently as an FO.

B.4  Career progression of P2

48.  On 21 August 2000, P2 commenced employment with Cathay as an SO on the B744. On 19 February 2003, P2 was promoted to JFO on the A330. On around 1 February 2004, P2 was promoted to FO. On 11 May 2010, P2 undertook a B777 conversion course.

49.  On 4 January 2011, P2 started to receive Command BPP.

50.  On 24 September 2011, P2 emailed Mr Denly Hau inquiring whether there was a Command Selection Panel meeting on 4 October 2011, and if he was to be assessed as Category A, when he could expect a command upgrade course. On the same day, Mr Hau replied to P2, stating that all of the command upgrade courses for the rest of the year had been filled by those FOs assessed as Category A in early September, and that a few courses were still needed to clear the list. Mr Hau stated that he did not yet have a training plan for the following year, and that his best guess would be February 2012 the earliest.

51.  P2 was due for command upgrade on passenger aircraft in seniority order in October 2011. He was selected for assessment for upgrade by the Command Selection Panel on 4 October 2011. The Panel assessed P2 as Category A (suitable for command training).

52.  Mr Hau did not write to P2 to offer command upgrade training courses in October 2011. This was because the vacancies were full at the time and the provisional training plan for the following year was not yet available (see [50] above).

53.  On 17 October 2011, P2 wrote to Mr Hau again, asking if Cathay might have a date for when he would start his command upgrade course. On the same day, Mr Hau replied that the first available B777 command “current on type” course was scheduled on 14 February 2012 and they would confirm the course date by the beginning of December.

54.  On 21 October 2011, P2 emailed Mr Hau and said he was very keen to start the command upgrade training course as soon as possible as he had a third baby due in March 2012. He asked that if Cathay had a course date any time earlier then he would be 100% available to start on any date from then.

55.  On 21 October 2011, Captain Peter Clemmow (Cathay’s Deputy Flying Training Manager) asked to review P2’s Category A status at the November 2011 Command Selection Panel meeting. That meeting took place on 8 November 2011. The Boeing training office requested the review because of P2’s performance in a command upgrade course for another officer, in which P2 was acting as an FO. At that meeting, P2 was re-confirmed by the Command Selection Panel as Category A.

56.  On 12 November 2011, P2 wrote to Mr Hau to indicate that he wanted to receive “current on type” command training on the B777 and asked when that could begin. On the same day, Mr Hau replied that it would be in February 2012. P2 was eventually allocated a B777 “current on type” command upgrade course to commence on 14 February 2012. There were other command upgrade courses earlier in 2012, being the B744 “current on type”, A330 “current on type”, or B777 “not on type” courses. There were 4 FOs junior to P2 in the Seniority List who commenced command upgrade training ahead of P2. Cathay’s position is that they were on other fleets (B744 or A330) and were taking “current on type” courses on those fleets, which P2 did not ask for and in any event would not be eligible to take (given he was on the B777).

57.  P2 was promoted to Captain on Probation on the B777 on 15 April 2012, and to Captain on 15 October 2012. He therefore stopped receiving Command BPP on 14 April 2012. In October 2014, P2 became a Training Captain. He is currently a Senior Captain.

58.  Since 5 November 2020, P2 has been employed under CPA COS-18, which does not provide for BPP.

B.5  Career progression of P4

59.  On 7 February 2000, P4 commenced employment with Cathay as an SO on the B744. On 29 April 2002, P4 was promoted to JFO on the A330. On 28 March 2003, P4 was promoted to FO on the A330. On 31 March 2005, P4 took up home base in Australasia and switched to be employed by NZB as an FO on the A330. On 28 November 2007, P4 became an SFO on the A330.

60.  In response to Cathay’s internal advertisement, P4 bid for command vacancy on freighter aircraft in Sydney and was advised that his bid was successful on 7 January 2008. Accordingly, he was arranged to be assessed for suitability for command upgrade by the Command Selection Panel. On 4 March 2008, P4 was assessed by the Command Selection Panel as suitable for command upgrade on the freighter aircraft.

61.  On 2 and 9 October 2008, Mr Hau and the NZB manager respectively informed P4 that his freighter command upgrade course would commence on 10 December 2008. On 13 October 2008, P4 indicated by email that due to personal reasons, he no longer wished to take up a Sydney based freighter position and intended to remain as an Auckland based FO until his passenger command course. His freighter command upgrade course was therefore cancelled.

62.  On 1 July 2010, P4 started to be paid Command BPP.

63.  P4 was due for command upgrade on passenger aircraft in seniority order in January 2011. He was arranged to be assessed by the Command Selection Panel on 4 January 2011. This assessment was needed because his status as suitable for command upgrade in the previous assessment in March 2008 had expired after 18 months. P4 was confirmed as Category A at that meeting.

64.  On 27 January 2011, Mr Hau wrote to P4 to offer him an A330 “current on type” command upgrade course in Hong Kong commencing on 19 April 2011. On 1 February 2011, P4 replied that he wished to defer his command upgrade training until a command vacancy arose at his home base, pursuant to clause 8.2 of the Permanent Basings Policy Arrangement 2006 (“PBPA 2006”). P4 did not take up the course offered.

65.  On 27 April 2011, Mr Hau wrote to P4 to offer him an A330 “current on type” command upgrade course in Hong Kong commencing 12 July 2011. On 4 May 2011, P4 replied that he wished to defer his command upgrade training, pursuant to clause 8.2 of the PBPA 2006. P4 did not take up the course offered.

66.  On 7 June 2011, Mr Hau wrote to P4 to offer him a B777 “not on type” command upgrade course commencing 9 August 2011. On 9 June 2011, P4 replied that he wished to defer his command upgrade training, pursuant to clause 8.2 of the PBPA 2006. P4 did not take up the course offered.

67.  On 16 June 2011, Cathay’s Ms Connie Cheng emailed P4 stating that his salary for June 2011 would be retrospectively adjusted on the basis that his Command BPP should have stopped on 19 April 2011, i.e. the date of the first A330 command upgrade course offered to him which he did not take up. P4 therefore received Command BPP up to 18 April 2011.

68.  On 8 April 2014, P4 emailed Cathay’s Ms Fione Wong, starting that he wished to commence a command upgrade course on the B777. No such course was offered to P4. The only available B777 courses were “current on type” courses which were not suitable for P4 (he was an SO on the A330). No B777 “not on type” command upgrade course had been offered to any Cathay pilot since May 2012.

69.  On 3 December 2014, P4 emailed Cathay’s Ms Anna Thompson, stating that his intention in returning to Hong Kong was solely to take up a command on the B777, and that he was not prepared to return to Hong Kong with no guarantee of a conversion course (from A330) in order to take up a B777 command. On 17 December 2014, Ms Thompson replied that although the timing was possible for P4 to first take a conversion course for B777 in Hong Kong and then a subsequent “current on type” command upgrade course, she could not guarantee a B777 command for him if he returned to Hong Kong. In the end, P4 did not return to Hong Kong.

70.  On 7 March 2017 and 5 September 2018, the Command Selection Panel confirmed P4’s Category A status.

71.  P4 left NZB’s employment on 30 September 2021, upon the closure of the New Zealand base.

B.6  Major contractual provisions

72.  CPA COS-99 and NZB Conditions of Service (2002) (“NZB COS-02”) under which Ps were employed, are in materially identical terms.

73.  Clause 3.1 of CPA COS-99 and clause 3.1 of NZB COS-02 provide that “[a]n Officer will serve the Company by operating any aircraft as defined in [Cathay’s] Air Operator’s Certificate in any part of the world and on any of the routes served by the Company.”

74.  The following provisions in CPA COS-99 and NZB COS-02 concern Command BPP and are at the heart of the construction exercise to be undertaken by this Court in resolving the disputes:

(1)  CPA COS-99, clause 10.1/NZB COS-02, clause 9.1

“In any case of retention of Captains beyond Retirement Age, subject to 10.3 & 10.4, the next most senior First Officer on the Aircrew Seniority List will receive Command Bypass Pay in the form of Captain’s Salary, allowances and benefits on a one for one basis commencing upon the date that the retained Captain reaches the Retirement Age. The payment of Command Bypass Pay will cease when the retained Captain retires.”

(2)  CPA COS-99, clause 10.4/NZB COS-02, clause 9.3

“An Officer who has declined to undertake a Command Training course will not be eligible for Command Bypass Pay.”

75.  The FACA Annex contains the following provisions which affect the BPP provisions in CPA COS-99 and NZB COS-02:

(1)  Clause 9.1

“Company Officers will not receive Bypass Pay as a result of ASL Officers accepting the Offer of Employment.” [4]

(2)  Clause 9.2

“Company Officers who operate Passenger Aircraft and who decline to accept an offered command vacancy solely on Freighter Aircraft will not be deemed to have declined to undertake a Command Training course and will remain eligible to receive Command Bypass Pay in accordance with their Conditions of Service.”

(3)  Clause 9.3

“In the event that Company Officers have their employment extended beyond the normal Retirement Age, solely to operate Freighter Aircraft, without the Command vacancy on the Freighter Aircraft being open to bid by Company Officers, Bypass Pay will be paid in the normal manner in accordance with Company Officers’ Conditions of Service.”

(4)  Clause 9.4

“Company Officers who operate Passenger Aircraft and who are not eligible for, do not bid for or do not accept a vacancy on Freighter Aircraft will not be eligible to receive Bypass Pay as a result of appointments on Freighter Aircraft.”

76.  Mr Man submits, and I accept, that in general terms, under the FACA Annex (which expired on 1 January 2008):

(1)  Clause 9 has the effect that BPP will not be payable by virtue of the employment of ASL pilots on 1 January 2000.

(2)  Further, it intends to maintain a distinction between Passenger Pilots and Freighter-only Pilots, such that Passenger Pilots will not forfeit their rights to BPP (which is on passenger pay scale) by passing over freighter command positions, and likewise Passenger Pilots who are not interested in freighter command positions will not receive BPP (which would be on passenger pay scale) simply because a Freighter-only Captain is appointed.

77.  The following provisions in CPA COS-99 and NZB COS-02 concern promotion:

(1)  CPA COS-99, clause 6.1

“It is the Company’s aim to recruit Pilots suitable for full career progression to Command. All newly recruited Pilots will join the Company at one of the following three entry levels:

a. Second Officers by the Cadet Pilot Programme

b. Second Officers by Direct Entry

c. First Officers by Direct Entry”

(2)  CPA COS-99, clause 6.2

“Recruitment of First Officers by Direct Entry will normally only take place when there are no Second Officers suitable for promotion.”

(3)  CPA COS-99, clause 6.3

“In the event that recruitment of First Officers by Direct Entry occurs, other than in accordance with 6.2, Second Officers suitable for promotion will not normally have their promotion to Junior First Officer delayed by more than twelve (12) months whilst such First Officer recruitment by Direct Entry is taking place.”

(4)  CPA COS-99, clause 7.1(a)/NZB COS-02, clause 6.1(a)

“Selection of Officers for promotion to higher rank will be in accordance with seniority on the Officer’s relevant seniority list and is subject to a Selection Panel recommendation.”

(5)  CPA COS-99, clause 7.5(a)/NZB COS-02, clause 6.3(a)

“On the satisfactory completion of a final line check, and subject to a review by the Company, an Officer will be promoted to the rank of Captain on Probation.”

78.  Finally, the following provisions in CPA COS-99 and NZB COS-02 concern salary increments:

(1)  CPA COS-99, clause 8.3/NZB COS-02, clause 7.3

“Subject to satisfactory service, as determined by the Company, an Officer will receive a Salary increment as specified in Schedule 1 on the anniversary of the date of his/her appointment.”

(2)  CPA COS-99, clause 8.4/NZB COS-02, clause 7.4

“On promotion, an Officer’s salary will be increased in accordance with Salary scales as specified in Schedule 1.”

C.  LEGAL PRINCIPLES

C.1  Principles of contractual interpretation

79.  When interpreting a written contract, the Court is concerned to identify the intention of the parties by reference to what a reasonable person, having all the background knowledge which would have been available to the parties, would have understood them to be using the language in the contract to mean: Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [14].

80.  Interpretation is a unitary exercise. Whilst the starting (and usually ending) point is the ordinary and natural meaning of the words, words must be construed in context, taking into account the purpose of the contract and the subject provision, other relevant provisions in the contract, the facts and circumstances known or assumed by the parties at the time when the contract was executed, the quality of the drafting of the instrument, and commercial common sense: Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487 at [43]-[44].

81.  Mr Chua submits that when interpreting an employment contract, the Court should construe the terms in a manner that is “workable and clear”, and represents a “reasonable balance between the interests of employer and employee”, citing Blakeney-Williams v Cathay Pacific Airways Ltd (2012) 15 HKCFAR 261 at [64]. He also refers to Gisda Cyf v Barratt [2010] ICR 1475 for the following propositions:

(1)  A construction to hold the balance between employer and employee “does not require – nor should it – that both sides be placed on equal footing”: at [35].

(2)  This is because “employees as a class are in a more vulnerable position than employers”: at [35].

(3)  Where appropriate, “an interpretation that promotes employees’ rights, as opposed to one which is consonant with traditional contract law principles, is to be preferred”: at [37].

(4)  The Court’s approach is to move away from the ordinary law of contract as governing employer and employee contractual relations: at [39].

82.  I agree with Mr Man that insofar as Mr Chua suggests that the approach to interpretation of employment contracts is different from the interpretation of ordinary contracts, particularly to the extent that an interpretation that supports employees’ rights should be favoured, this is not supported by the authorities cited by Mr Chua:

(1)  Gisda Cyf v Barratt was a decision regarding the proper construction of s.97 of the UK Employment Rights Act 1996. Lord Kerr (giving the judgment of the Court) indicated that considerations pertaining to the vulnerability of employees, the need to safeguard employee’s rights and so forth “provide the essential rationale for not following the conventional contract law route in the approach to an interpretation of section 97”: [35]. The UK Supreme Court was only concerned with whether the proper approach to interpretation of an employment statute should hew to the usual approach of contractual interpretation.

(2)  Lord Neuberger NPJ’s reference in [64] of Blakeney-Williams v Cathay Pacific Airways Ltd to “a reasonable balance between the interests of employer and employee” does not establish an independent principle of construction applicable to employment contracts. Rather, the interests of employer and employee are part of the “overall purpose” (see the beginning of [64]) – thus the context – against which the contract is to be construed.

(3)  Mr Man also refers me to Chong Cheng Lin Courtney v Cathay Pacific Airways Ltd [2011] 1 HKLRD 10 at [58] and Law Ting Pong Secondary School v Chen Wai Wah [2021] 3 HKLRD 185 at [47]-[49], neither of which suggests that the approach in construing an employment contract is different from construing any other type of contract.

83.  The proper approach to construing the contractual provisions in the present case is to apply the conventional contractual interpretation principles, taking into account, as part of the context and factual matrix, the fact that the contract arises out of an employment relationship.

C.2  Implied terms

84.  A convenient summary of when and how a term is to be implied into a contract is set out in Re Force India Formula One Team Ltd [2022] EWHC 933 (Ch) at [16]:

“ (i) A term will not be implied unless, on an objective assessment of the terms of the contract, it is necessary to give business efficacy to the contract and/or on the basis of the obviousness test;

(ii) The business efficacy and the obviousness tests are alternative tests. However, it will be a rare (or unusual) case where one, but not the other, is satisfied;

(iii) The business efficacy test will only be satisfied if, without the term, the contract would lack commercial or practical coherence. Its application involves a value judgment;

(iv) The obviousness test will only be met when the implied term is so obvious that it goes without saying. It needs to be obvious not only that a term is to be implied, but precisely what that term (which must be capable of clear expression) is. It is vital to formulate the question to be posed by the officious bystander with utmost care;

(v) A term will be not be implied if it is inconsistent with an express term of the contract;

(vi) The implication of a term is not critically dependent on proof of an actual intention of the parties. If one is approaching the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time;

(vii) The question is to be assessed at the time that the contract was made: it is wrong to approach the question with the benefit of hindsight in the light of the particular issue that has in fact arisen. Nor is it enough to show that, had the parties foreseen the eventuality which in fact occurred, they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred;

(viii) The quality of a suggested implied term is an essential but not sufficient pre-condition for inclusion. A term should not be implied into a detailed commercial contract merely because it appears fair or merely because the court considers the parties would have agreed it if it had been suggested to them. The test is one of necessity, not reasonableness. That is a stringent test.”

85.  Various implied terms are pleaded in the Statement of Claim, which Mr Chua in his opening distills into 4 categories:

(1)  an implied term of co-operation, that each party shall do all that is necessary to be done on its part, to enable the employment contracts to be properly performed;

(2)  an implied term by necessity to give business efficacy that Cathay shall adhere to the Seniority List when dealing with all matters concerning Ps’ remuneration and promotion; in particular, Cathay shall not recruit Captains by Direct Entry, nor select officers for promotion to higher rank, without proper regard to the relevant seniority in the Seniority List;

(3)  an implied term by operation of law, as a necessary incident of the employment relationship, that Cathay/NZB would not conduct themselves in a manner to undermine the trust and confidence that their employees were reasonably entitled to have in their employer; and

(4)  an implied term that Cathay/NZB shall not act arbitrarily, capriciously, irrationally or inequitably in exercising any discretions and powers under the employment contracts, in all matters concerning their employees’ career progression and remuneration.

86.  As to the implied term of co-operation, Mr Chua argues that such a term is necessary to give business efficacy to the employment contracts of Ps since: (1) the concept of seniority is cardinal to the employment contracts; and (2) issues of pay (including BPP) go to the root of the employment contracts. Ps pleaded that the implied term gives rise to the following obligations of Cathay/NZB:

(1)  They shall not seek to rely on clause 6.2 of CPA COS-99 (and the NZB COS-02 equivalent) and avail themselves of the option or convenience of employing DEFOs by withholding or delaying the assessment of SO’s suitability for promotion;

(2)  They shall not hinder or delay the SOs’ entitlement to First Officer BPP by withholding or delaying assessment of the SOs’ suitability for promotion, or by delaying or otherwise inhibiting assessment or training under Operations Manual Volume 7, Part 1;

(3)  They shall not recruit DEFOs without first exhausting the pool of SOs suitable for promotion.

87.  All of the above concern SOs and First Officer BPP which are no longer relevant following the dismissal of the 3^rd plaintiff’s claim (based on purported delay in his promotion from SO to FO).

88.  In his opening, Mr Chua refers to a series of obligations on promotions and remuneration which are said to flow from the implied term of co-operation:

“On promotion

(1) To follow the Aircrew Seniority List when offering assessment opportunities and making selection for promotion.

(2) If the Defendants contend that promotion is subject to a Selection Panel assessment, the Defendants must ensure that Command Upgrade courses are made available to officers in accordance with the Aircrew Seniority List.

On remuneration

(3) The Defendants should do all that is necessary to ensure that where a Captain is retained beyond Retirement Age (and thereby delaying the progression of FOs and SOs as the case may be), all affected Officers are compensated in accordance with the Bypass Pay Provisions.

(4) If this Court finds for the Plaintiffs on the interpretation of the Bypass Pay provisions, it follows that the Defendants must ensure that Bypass Pay is paid upon the retention of freighter and passenger Captains beyond the Retirement Age.

(5) The Defendants shall do all that is necessary on their part to ensure that Officers entitled to Bypass Pay is compensated in line with the Bypass Pay provisions. Accordingly, if this Court finds for the Plaintiffs on Bypass Pay, and promotion delay, the Defendants must also ensure that an Officer who receives or should receive Bypass Pay is also awarded with salary increments annually under Schedule 1 of COS-99.”

89.  As Mr Man points out, none of the above is pleaded and Ps cannot rely on them. In any event, they do not add anything of substance to the express terms of the contracts: they merely require Cathay/NZB to do what is necessary to perform their contractual duties, and cannot impose any greater obligation on Cathay/NZB than would otherwise exist under the express terms.

90.  As to the implied term that Cathay “shall” adhere to the Seniority List when dealing with “all matters” concerning Ps’ remuneration and promotion, such a term is too wide and is contradicted by the express terms of CPA COS-99 (and its NZB COS-02 equivalent), including: (1) clause 7.1(a) which provides that selection of officers for promotion “is subject to a Selection Panel recommendation”, such that seniority is not the only factor which Cathay/NZB is entitled to take into account; and (2) clause 7.2(c) which makes clear that the number and timing of JFO upgrade courses is “dependent upon Company requirements”.

91.  The further pleaded obligation that Cathay/NZB shall not recruit Captains by Direct Entry, nor select officers for promotion to a higher rank, without regard to the relevant seniority on the Seniority List, is unnecessary to imply and adds nothing to Ps’ case. These matters are dealt with by the express terms in clauses 6.1 and 7.1(a) of CPA COS-99 (and their NZB COS-02 equivalent). As a matter of fact, Cathay/NZB did not recruit pilots directly to the rank of Captain: the so-called “Captains by Direct Entry” joined Cathay/NZB as DEFOs: see [35] above.

92.  In his opening, Mr Chua refers to a number of obligations said to arise from the implied duty to adhere to the Seniority List:

“Promotion

(1) Given the key importance of seniority and promotion, the parties’ mutual intention was clear: selection of officers for promotion to higher rank will be in accordance with seniority on the Officers’ relevant seniority list.

(2) Insofar as clause 7.1 (of CPA COS-99) also refers to a “Selection Panel recommendation”, this does not refer to a discretion, let alone wide and unfettered. Instead, such a recommendation could only be withheld for good reason. For instance, lack of sufficient experience, or not being a fit and proper person for promotion. There is no reference whatsoever to Cathay having a “discretion” when offering Command Upgrade Courses, and selecting officers for promotion. Moreover, any recommendation must be exercised in accordance with the contractual purpose of the relevant provisions on seniority and promotion.

(3) It follows that Cathay was not entitled to recruit Captains by Direct Entry, contrary to “all newly recruited pilots will join [Cathay] at one of the following three entry levels” specified in clause 6.1 (of CPA COS-99). Instead, the mutual intention was that FOs shall be promoted to Captain “in accordance with seniority on the Officers’ relevant seniority list”.

(4) While Cathay had a potential conflict of interest in whether and how many Officers are promoted, as stated it is striking that it is not Cathay’s pleaded case, nor evidence that first, it is sought to achieve a reasonable balance between the interests of employer and employee. Second, it achieved such a balance. Third, that any specific provision in COS-99 was “so clear that it precludes those standards being satisfied”, applying Blakeney-Williams at [64].

Remuneration

(5) Cathay was not entitled to obstruct, or delay payment of Bypass Pay by withholding or delaying any assessment of Officers who would otherwise be the “next most senior” officer eligible for Bypass Pay.

(6) Instead, Cathay was obliged to exercise its discretion (if any) in providing Command Upgrade courses, in line with the purpose and scope of the seniority, and Bypass Pay provisions (clauses 5, 7 and 10).

(7) Cathay was not entitled to be guided solely or mainly by its own self-interest. For instance, as to the cost and time of providing Command Upgrade courses to FOs. Otherwise, this would avoid or delay any assessment of pilots as “suitable for promotion” for seniority and Bypass Pay purposes.”

93.  (1) and (3) concern the proper interpretation of the express terms CPA COS-99 (and its NZB COS-02 equivalent). Other matters are not pleaded as part of the implied term and Ps cannot rely on them.

94.  As to the implied term of mutual trust and confidence, I agree with Mr Chua that such term is implied into employment contracts as a necessary incident of the employer-employee relationship, unless it is expressly excluded by the parties: Malik v BCCI [1998] AC 20 at 45D-E; Geys v Societe Generale [2013] 1 AC 523 at [55]-[56]; James-Bowen v Commissioner of Police of the Metropolis [2018] 1 WLR 4021 at [16]. Ps pleaded that such an implied term obliges Cathay/NZB to treat their employees fairly throughout the employment relationship, and in the conduct of their business, given the express and implied terms of the contracts of employments.

95.  For the implied duty of trust and confidence to be breached, the employer’s conduct must (1) have no reasonable and proper cause, and (2) be calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. These conditions circumscribe the potential reach and scope of the implied obligation: Malik at 45F-G, 53C. The implied obligation is apt to cover the great diversity of situations in which a balance has to be struck between an employer’s interest in managing its business as it sees fit, and the employee’s interest in not being unfairly and improperly exploited: Malik at 46D. In assessing whether there has been a breach, what is significant is the impact of the employer’s behaviour on the employee rather than what the employer intended, and the impact will be assessed objectively: Malik at 47B-C. The employer’s motive is irrelevant: Malik at 47G.

96.  In his opening, Mr Chua contends that a number of obligations flow from the implied term of trust and confidence:

“Promotion

(1) Cathay was obliged to act fairly, and not contrary to, or to undermine its express obligations under COS-99.

First, recruiting many Captains by Direct Entry was never envisaged in Clause 6.1 on “all” newly recruited Pilots joining Cathay at “three entry levels”, i.e. SO’s (Cadet Pilots and Direct Entry) and FO’s by Direct Entry. Thus, recruiting Captains by Direct Entry was in plain breach of Clause 6.1.

Second, on promotion time frame in recruiting FO’s by Direct Entry when there were SO’s “suitable for promotion”, under Clause 6.2. And then SO’s promotions being “delayed by more than 12 months”, contrary to Clause 6.3.

Third, in effecting promotions not “in accordance with seniority” on the Seniority List when offering Command and upgrade training, and consequent promotion to the Plaintiffs. Instead, Cathay wrongly offered such training and consequent promotion “normally on the same aircraft type”, and solely or mainly by reference to Cathay’s “business demands and operational needs”.

(2) Given the disparity of powers between the parties, Cathay could have regard to its own interests when offering Command and upgrade courses and promotions, but only to the extent it complied with all its express and implied contractual obligations. It was not entitled to breach such obligations to its employees. For instance, by not preserving its employee’s rights, but instead undermining them unilaterally, thereby causing serious damage to the employment relationship.

Remuneration

(3) Cathay was not entitled to act contrary to, or to undermine its express obligations to cause Bypass Pay to be paid to the Plaintiffs when any Captains were retained beyond Retirement Age.

(4) It follows that Cathay cannot impose the 2008 Policy unilaterally, on the Plaintiffs. This was never agreed nor signed, and was contrary to the intended effect of the FACA and FACA Annex expiring upon ASL ceasing to employ freighter pilots.

(5) Cathay was not entitled to ignore its express obligations to pay salary increments specified in Schedule 1 to COS-99, including those arising from Bypass Pay being payable.

(6) Nor could Cathay escape its obligations on Bypass Pay by arguing that a Second Officer was not “suitable for promotion” under Clause 10.2 for no rational reason. And delaying or not assessing an Officer’s suitability for promotion.

(7) Nor could Cathay unilaterally amend COS-99. Deferring a course for one’s own home base of choice does not constitute “declining” a course, under Clause 10.4 of COS-99.”

97.  As submitted by Mr Man, (1) adds nothing to the express terms, the proper interpretation of which forms the crux of this litigation. (2) is neither here nor there – Cathay/NZB are obliged to perform their contractual obligations, and provided that they do so, whether they have regard to their financial interests is irrelevant. (3) to (7) are not pleaded, and do not add anything to the express terms or general law.

98.  As to the implied term relating to contractual discretions, as a general rule, the scope of a contractual discretion will depend on the nature of the discretion and the construction of the language conferring it. In the absence of very clear language to the contrary, a contractual discretion must be exercised in good faith and not arbitrarily or capriciously. This will normally mean it must be exercised consistently with its contractual purpose: Braganza v BP Shipping [2015] 1 WLR 1661 at [27], citing British Telecommunications plc v Telefonica O₂ UK Ltd [2014] Bus LR 765 at [37]. Ps pleaded that such an implied term obliges Cathay/NZB to:

(1)  genuinely exercise their discretions and powers by considering and giving effect to a reasonable balance between the interests of employer and employee, that employees’ contractual rights would be upheld, and they would not be unfairly exploited;

(2)  exercise such discretions and powers fairly and rationally, given the parties’ rights and obligations, the purpose of the employment contract and its clauses, and the reasonable expectations of employees thereby created; and

(3)  consider all relevant matters, including the matters in (1) and (2) above, and the approximate time frames in clauses 6.3 and 7.2 of CPA COS-99 for promotion of SO to JFO.

99.  The pleaded obligations above add nothing of real substance to the requirement that Cathay/NZB must perform in accordance with the terms of CPA COS-99 and NZB COS-02.

100.  In his opening, Mr Chua argues that the implied term on contractual discretion applies to any discretion and power by Cathay concerning the following matters:

“Promotion

(1) Command Upgrade courses to FOs could not be offered in an arbitrary, or irrational manner. For instance, by considering matters irrelevant to the purpose of Clause 7.1a on seniority. For instance, the time and cost of providing not on-type, or conversion courses to pilots.

(2) If it has been intended that Cathay has a discretion, to employ Captains by Direct Entry, notwithstanding the seniority rule and Clause 6.1, this would have been express and clear. For example, see Clause 15(e) of the Employee Handbook for Pilots 2020 which provide a stark contrast. Cathay cannot rewrite or amend COS-99, and ask the Court to improve COS-99 for it.

Remuneration

(3) Whether a Captain’s retention upon reaching the Retirement Age triggers the Bypass Pay provisions is a matter of interpretation, and not Cathay’s discretion, or whim.

(4) Similarly, whether a particular FO has “declined” a Command Upgrade Course thereby disentitling him to Bypass Pay under Clause 10.4 is a matter of interpretation, and not discretion.

(5) On annual salary increments, Cathay cannot escape the provision under Clause 8.3 “on the anniversary of the date of his/her employment”, that annual salary increments are “subject to satisfactory service”, by relying on an unfettered discretion.”

101.  (1) is not pleaded. It is in any event wrong to contend that it is “arbitrary” or “irrational” for Cathay to consider matters such as business and operational needs, available training resources, time and costs etc., in deciding what command upgrade courses to put on offer at any particular time. (2) to (5) are matters of interpretation of the express terms.

102.  Finally, Ps rely on the prevention principle. Its application is predicated upon Cathay/NZB having committed a wrong involving a breach of contract: Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 at [94]. This adds nothing to the analysis.

D.  COMMAND BPP CLAIM

103.  Ps claim that their Command BPP was delayed, because Cathay/NZB had omitted to include Freighter-only Captains retained beyond retirement age in their calculations of BPP. Specifically:

(1)  P1 contends that he should have been paid Command BPP as from 19 January 2009, rather than from 14 March 2011;

(2)  P2 contends that he should have been paid Command BPP as from 1 July 2008, rather than from 4 January 2011; and

(3)  P4 contends that he should have been paid Command BPP as from 18 May 2018, rather than from 1 July 2010.

104.  How the respective dates above are to be worked out is not material for present purposes on liability.

105.  There are 3 main issues pertaining to this claim, which turn on the proper constructions of the contractual provisions:

(1)  Whether the term “Captains” in clause 10.1 of CPA COS-99 (and its NZB COS-02 equivalent) should be construed to mean all Captains, without distinction between Passenger Captains and Freighter-only Captains;

(2)  Whether P1/P2’s failure to bid for freighter-only positions, and P4’s failure to accept the freighter-only position for which he had bid, should disentitle them from Command BPP as a result of Cathay’s retention of Freighter-only Captains beyond their retirement age, pursuant to clause 10.4 of CPA COS-99 (and its NZB COS-02 equivalent); and

(3)  In the case of P4, whether Command BPP would still be payable if the retirement age of 55 was not enforceable under New Zealand law (i.e. the law of his base).

D.1  Proper construction of “Captains”

106.  Mr Chua submits that on a true construction of CPA COS-99 (and its NZB COS-02 equivalent), Cathay was obliged to take into account any Captains retained beyond the retirement age of 55 when administering Command BPP, whether they are Passenger or Freighter-only Captains. His argument runs as follows:

(1)  Clause 10.1 refers to “any” case of retention of Captains, without distinguishing between type of Captains, or aircraft type. This construction is clear and workable. There is no reason not to give the word “any” its ordinary and natural meaning. There is nothing in CPA COS-99 to suggest a distinction of two types of pilots (Passenger and Freighter-only) for BPP purposes. Otherwise, clause 10.1 would have been worded differently.

(2)  Appendix 2 of CPA COS-99 makes clear that the Seniority List is a “common” seniority list for “all” pilots. This further suggests that there is no distinction between Passenger and Freighter-only Pilots within CPA COS-99.

(3)  Clause 3.1 expressly provides that Cathay may require an officer to operate “any” aircraft in “any” part of the world and on “any” of the routes served by Cathay. This would include both freighter and passenger aircraft.

(4)  According to Mr Rhodes, when CPA COS-99 and the FACA were negotiated in 1999, the long-term goal was to have all freighter and passenger pilots on one seniority list, flying both freighter and passenger aircraft. Against that background, Cathay and HKAOA negotiated and promulgated CPA COS-99 with the wording “any case of retention of Captains”, and left the details on the difficult task of integrating the freighter fleet to be built into an annex (i.e. the FACA Annex). That being so, the obvious intention was for clause 10.1 of CPA COS-99 to have general application to all Captains retained on the Seniority List, whether passenger or freighter, and the provisions to disapply BPP for freighter appointments were instead left in the FACA Annex which was known to have a temporary validity, with no guaranteed renewal.

(5)  After expiry of the FACA and FACA Annex, the parties did not reach any agreement to similar terms being inserted into CPA COS-99, or CPA COS-99 being amended to similar effect. The contract terms do not state that the FACA Annex would continue to apply after its expiry. The natural inference is that any such suggestion was deliberately omitted. One can then only sensibly look to clause 10.1 of CPA COS-99 and its ordinary and natural meaning, which was drafted to refer to “any” Captains retained beyond retirement age, without distinguishing between Passenger and Freighter-only Captains.

107.  Mr Man submits that in construing the BPP provisions, one may start with the context which is the surer guide to interpretation. He refers to the following facts and circumstances prevailing at the time of contracting as being important parts of the factual matrix:

(1)  At the time of contracting, there were 2 groups of pilots employed by Cathay, namely Passenger and Freighter-only Pilots, with a clear distinction between them. They were treated differently, at least as long as the FACA Annex was valid. See [25] above.

(2)  Whilst the FACA Annex was intended to be a temporary arrangement facilitating the gradual integration of the crewing of freighter aircraft using Cathay employees, there was no obligation on the part of Cathay to achieve complete integration between Passenger and Freighter-only Pilots when the FACA Annex expired.

(3)  Accordingly, the objective intention of the parties could not have been that upon the expiry of the FACA Annex, whatever was the state of assimilation between Passenger and Freighter-only Pilots, the BPP provisions would operate in a way without distinction between them. As an illustration, the parties obviously did not intend that Passenger Pilots should forfeit their BPP by declining freighter command courses, when Freighter-only Pilots remain inferior to them.

108.  Viewed in such light, Mr Man submits that the objectively manifested intention of the parties at the time of contracting (“Intention”) is as follows:

(1)  Whilst the FACA Annex was valid, the terms of the FACA Annex would apply.

(2)  Failing any other agreement between Cathay and the employees, when the FACA Annex ceased to be valid, the effect of the BPP provisions would depend on whether Freighter-only Pilots existed as a separate and distinct category of pilots within Cathay.

(3)  If, at the time when the FACA Annex ceased to be valid, Freighter-only Pilots still existed as a separate and distinct category of pilots within Cathay, the terms of the FACA Annex concerning BPP would continue to have effect until Freighter-only Pilots ceased to exist as a separate and distinct category of pilots within Cathay. In other words, the BPP provisions should take effect as if there continued to be “two queues” (as had been the case under the FACA Annex), such that a Passenger Pilot should receive BPP only if there was a retention of a Passenger Captain or the employment of a Passenger DEFO beyond the retirement age.

109.  I prefer Mr Chua’s construction:

(1)  Mr Man’s construction is premised upon the provisions in the FACA Annex – or at least their spirit – continuing to apply for as long as Cathay maintains a separate category of Freighter-only Pilots. However, the FACA Annex has already expired by 1 January 2008. As Mr Chua submits, there is no sound basis for treating an expired contract as somehow “alive”.

(2)  Cathay and HKAOA knew that after the expiry of the FACA and FACA Annex, a new or replacement arrangement had to be negotiated between them, and approved by HKAOA. Logically, if the parties failed to negotiate a new arrangement, there would simply be no agreement. As a matter of common sense, the only agreement then left between the parties would be CPA COS-99 which, without the FACA Annex, made no reference to Freighter-only Pilots at all.

(3)  That after the expiry of the FACA Annex, Cathay continues to maintain Passenger and Freighter-only Pilots as two distinct groups of pilots with different treatments, does not mean that the BPP provisions would operate with such a distinction as if there continued to be “two queues” post-FACA Annex.

(4)  Mr Man submits that the use of the term “on one for one basis” in clause 10.1 of CPA COS-99 and clause 9.1 of NZB COS-02 reflects that the pilot whose extension generates BPP must “correspond in type” with the pilot who receives BPP as a result – hence “one for one”. The two pilots must therefore be of the same type, i.e. they must both be Passenger Pilots. As Mr Chua submits, there is nothing to suggest that the phrase has anything to do with Passenger or Freighter-only Pilots: the phrase “one for one basis” simply refers to “the retained Captain” and “the next most senior FO”.

(5)  Mr Man makes the further point that the purpose of BPP is to compensate Passenger Pilots from being prevented from, or deprived of an opportunity for, promotion, as a result of the retention of a Captain beyond the retirement age. If there remains a distinction between Passenger and Freighter-only Pilots, and a Passenger Pilot has no intention to, has not and would not bid for freighter positions, then he would not be deprived of anything if that freighter position went to somebody else, and the parties did not intend that he would need to be compensated. This supports his construction that the retained Captain and the next most senior FO must both be Passenger Pilots. This is unconvincing:

(a)  Passenger FOs can bid for a Freighter-only command position. The retention of a Freighter-only Captain beyond the retirement age does have the effect of depriving the next most senior FO the chance for promotion to a command position.

(b)  If a Passenger Pilot has no intention to, and does not, bid for a freighter command position, he would not be deprived of any command promotion opportunity and should not be compensated with Command BPP. But that does not mean that the retained Captain and the next most senior FO must be both Passenger Pilots. Rather, such a situation is to be dealt with under clause 10.4 of CPA COS-99, concerning the disentitlement to Command BPP in the event that an FO suitable for command upgrade declines to undertake a command upgrade training course.

(6)  Mr Man also refers to the MOU (see [17] above) whereby Cathay and HKAOA agreed that (a) ASL would be gradually phased out and freighter aircraft would be crewed on a “Junior Fleet” basis, and (b) the current costs of the freighter operation, specifically salary scales for the freighter fleet, had to be broadly maintained. The concept of a “Junior Fleet” with lower salary scales was expressed in the MOU to last indefinitely, and it evinces the clear intention of the parties that the lower costs of the freighter operation had to be maintained even after the expiry of the FACA and FACA Annex. An essential aspect of maintaining lower freighter costs was that the operation of the “Junior Fleet” would not trigger BPP for Passenger Pilots. Whilst that may have been the intention of the parties at that time, the MOU did not form part of CPA COS-99 and NZB COS-02, and the intention expressed in the MOU must also be premised upon Cathay and HKAOA reaching a new agreement after the expiry of the FACA and FACA Annex, which they never did. I fail to see how anything recorded in the MOU could cast light on how CPA COS-99 and NZB COS-02 should be interpreted.

(7)  Mr Man places reliance on clause 9 of the 2008 Policy (see [32] above) and argues that it is consistent with and reflects the Intention of the parties that the BPP provisions would continue to be interpreted to operate as “two queues”. The short answer to this, as Mr Chua submits (which I agree), is that the 2008 Policy was introduced by Cathay unilaterally, and was never agreed to by HKAOA. It is difficult to see how clause 9 of the 2008 Policy can be interpreted as reflecting the common intention of the parties, let alone at the time when CPA COS-99 and NZB COS-02 were entered into.

110.  Mr Man’s alternative construction is as follows:

(1)  At the time when CPA COS-99 was promulgated in July 1999, Cathay did not employ any Freighter-only Pilots. The same is true of NZB when NZB COS-02 was promulgated. Thus, at the time when they were promulgated, the word “Captains” in the BPP provisions could only have been intended to refer to Passenger Captains and not Freighter-only Captains.

(2)  The Freighter-only Captains were to be dealt with separately under the FACA Annex, and does not impact on the original objective intention of the parties when CPA COS-99 and NZB COS-02 was promulgated.

111.  I reject such alternative construction. There is no evidential basis to support a finding that the word “Captains” was intended to refer only to the type of Captains then employed by Cathay at the time when CPA COS-99 and NZB COS-02 were promulgated. There is no logical or commercial reason why Cathay and HKAOA would have so intended to restrict the scope of the term. Objectively construed, the parties must have intended the word “Captains” to refer to any type of Captain employed by Cathay, then and in the future, without distinguishing between Passenger and Freighter-only Captains nor the aircraft type.

112.  In conclusion, I find that on a proper construction, the term “Captains” under clause 10.1 of CPA COS-99 and clause 9.1 of NZB COS-02 cover both Passenger and Freighter-only Captains. All Captains should be treated as a homogenous group for purposes of BPP triggers, i.e. there should only be “one queue”.

D.2   Whether Ps declined to undertake command training course

113.  Under clause 10.4 of CPA COS-99 and clause 9.3 of NZB COS-02 (see [74] above), an officer who has declined to undertake any command training course cannot be eligible for Command BPP. Mr Man submits that on Ps’ construction (which I agree), the term “Captains” in the BPP provisions is to be interpreted as meaning any Captains regardless of whether they are Passenger or Freighter-only. That being the case, the BPP provisions as a whole must be construed consistently with the meaning of “Captains”, which is not specific to the passenger or freighter fleet. Thus, any officer (regardless of whether he is passenger or freighter-only) who has declined any command training course (regardless of whether it is for a passenger or freighter-only command vacancy) would cease to be eligible for Command BPP. Ps cannot have it both ways.

114.  Mr Man further argues that on proper construction, “declining” a command training course would include the following situations: (1) refusing to bid for an advertised command vacancy; and (2) refusing to accept/commence a training course which was offered to the pilot for a command vacancy. He develops his argument as follows:

(1)  The ordinary and natural meaning of the word “decline” is to refuse or object: Chief Executive of the HKSAR v Yau Wai Ching, HCMP 2819/2016 (unreported, 15 November 2016) at [35]. Put in another way, “decline” means to say “no” to something, and it does not necessarily convey the meaning that a person must have something before he can decline it: Murdock v Dresser-Rand Services SARL [2002] 2 HKC 85 at [8]. Therefore, it is not necessary for a pilot to have actually received an offer of a command training course before he can “decline” it. If a pilot refuses to put himself in a position whereby he can be offered a command training course (for example, if he refuses to bid for the command vacancy), he can be said to have “declined” the same.

(2)  Such interpretation accords with the purpose of the BPP provisions, which is to compensate a pilot who has been deprived of an opportunity to be promoted. The purpose of clause 10.4 of CPA COS-99 and clause 9.3 of NZB COS-02 is to recognize that where an officer declines to undertake command training, he has himself given up an opportunity to be promoted. This is so, whether the officer declines to bid for a command vacancy, or refuses to accept or commence a command training course offered to him. Plainly the parties did not intend that a pilot can, by simply not bidding for any command training course (and thereby not doing what is necessary to secure promotion and not doing a Captain’s actual job), receive BPP indefinitely.

115.  Mr Man submits that on the facts, Ps have “declined” command training courses within the meaning of clause 10.4 of CPA COS-99 and clause 9.3 of NZB COS-02:

(1)  P1 and P2 received offers to bid for freighter-only command positions, but they did not want to, and did not bid for such positions because of various reasons, including the inferior terms of employment. In his oral evidence, P1 described the freighter command position as “degradation to career”. P1 and P2 did not bid for any of the vacancies advertised prior to the hiring of the remaining pilots from ASL, pilots from Dragonair and other airlines in 2008.

(2)  After 1 January 2008 (when the FACA Annex expired), P1 and P2 did not bid for any vacancies for freighter positions either, despite their eligibility.

(3)  P1 also declined to accept a passenger command training course commencing 8 May 2012, being a “not on type” course for the A330: see [44] above.

(4)  In the premises, P1 and P2 had “declined” command training courses and were therefore not entitled to Command BPP up to the time when they undertook such course, even if Cathay had continued to pay them Command BPP pursuant to clause 9 of the 2008 Policy.

(5)  As for P4, he bid for and was awarded a freighter command training course on the B744 on 9 October 2008, to commence on 10 December 2008, for a position based in Sydney. On 13 October 2008, he refused that training course and stated that due to personal reasons, he no longer wished to take up a Sydney based freighter position: see [61] above. Thereafter, P4 refused 3 separate passenger command upgrade training courses which were offered to him in 2011: see [64]-[66] above. In the premises, P4 has “declined” command training courses and was not entitled to Command BPP up to the time when he undertook the course.

116.  In response, Mr Chua argues as follows.

117.  First, Mr Chua contends that a pilot cannot be treated as having “declined” a command training course where he selected a course beginning on a later date rather than the earliest available course. This is particularly so when there is no requirement (express or implied) in CPA COS-99 for a pilot to take a course with the earliest start date, even though Cathay had an “expectation” that pilots would take the first course offered. The word “decline”, properly interpreted, means when a pilot declines to take any command course at all (i.e. declines command).

118.  I reject this submission. As Mr Man points out:

(1)  Where an FO chooses a course beginning on a later date in lieu of the earliest available course, there can be no doubt that he has “declined” in the sense of having “refused” or “said no” to the earliest available course.

(2)  As Mr Christopher Kempis (Cathay’s Director of Flight Operations) put it in cross-examination:

“If we offer you a command course, it is offered on a date. If you take that command course, you start the course on that date. If you don’t take that, you decline that course. You aren’t declining command forever but you are declining that course. You decline a particular course which in effect defers your command, that is your choice.”

(3)  This is consonant with the purpose of the BPP provisions. By choosing a later course and refusing to take up the earlier one, the FO has by his own choosing deferred the date by which he could be promoted to Captain. He has not been deprived of an opportunity for promotion during the deferral: the delay in promotion was the result of his own choice. He should not be compensated by Command BPP during that period.

(4)  After all, the quid pro quo for payment of Command BPP is that the FO has to take the command training course offered to him. Otherwise it would be unfair – the FO would be getting a first year Captain’s salary and benefits without actually trying to take a command course to become Captain.

119.  Second, Mr Chua relies on correspondence between Cathay and HKAOA, Cathay’s Notice to Crew, and a General Manager Aircrew (GMA) Update issued in August 2008, in support of his construction of when a pilot is to be regarded as having “declined” a training course:

(1)  HKAOA’s letter dated 4 December 2000 to Cathay:

“… we do not believe an officer should be penalised for exercising his seniority choice but is unable to commence a course through circumstances beyond his control … In effect, he has not declined a course – he has accepted a course that has a defined date but is not yet available. This is different to a pilot who may decline to accept any course (say, for personal basing reasons) maybe for some considerable time and/or hoping for, say, a Right-Left Command on the B747-400, which is not currently defined.”

(2)  Cathay’s reply letter dated 20 December 2000:

“We will also agree to your suggestion regarding when a Pilot is and is not eligible for Command Bypass Pay.”

(3)  Cathay’s Notice to Crew dated 16 May 2001:

“In addition, CoS states that an “Officer who has declined to undertake a Command Training course will not be eligible for Command Bypass Pay.” To take the words literally an Officer who, for example, declines a Command Upgrade on the B777 to take a Command Upgrade on the A330 starting at a later date would not be eligible for Command Bypass Pay. The Company and the Association have discussed this issue and agreed that this was not the intent when the words were placed in the CoS many years ago. Therefore, it has been agreed that a pilot who has accepted a course with a planned date as in the above example, would be eligible. However, a pilot who declines to accept any course or who wants a Command Upgrade on an aircraft type that is not available (for example B744 on the Passenger Fleet) would not be eligible for Command Bypass Pay.”

(4)  GMA August 2008 Update:

“First Officers ineligible for bypass pay are … Officers who have informed the Company that they are unwilling to undergo all Command training (including training for a position on a base other than HKG).” (emphasis added)

120.  Mr Chua submits that Cathay’s letter, Notice to Crew and the GMA August 2008 Update are “official and explanatory documents” and are “informative of the parties’ and official thinking around the time of the contracts”, citing The State of the Netherlands v Deutsche Bank AG [2019] EWCA Civ 771 and AIG Europe Ltd v OC320301 LLP v The Law Society of England and Wales [2017] 1 All ER 143. Deutsche Bank AG concerned a statement of “Best Practices” issued by the International Swaps and Derivatives Association Inc commenting on the Credit Support Annex which it itself promulgated. AIG Europe Ltd concerned the Law Society Gazette’s explanation on the history and amendment for a term in an insurance policy providing for compulsory liability insurance for solicitors as required by the Solicitors’ Act 1974. The documents and statements involved, and the context upon which they were considered by the Court, are wholly different from the present case. As Mr Man submits, Cathay’s letter, Notice to Crew and the GMA August 2008 Update are not contractual documents and do not affect the parties’ contractual rights in CPA COS-99 and NZB COS-02. They only constitute post-contractual conduct which is inadmissible for interpreting a contract: Chitty on Contracts (34^th ed.) at §15-060.

121.  Third, Mr Chua argues that a pilot cannot be treated as having “declined” command training courses merely by not bidding for a freighter-only command position, because one cannot have “declined” a course which was not offered. This is answered by Mr Man’s submission set out in [114] above, which I agree. Mr Chua submits that this would lead to the “unfair and unreasonable result” in that an officer is forced to “bid” for a type of transfer to freighter operation – with lower salary and lower pay scale – or risk being treated as having “declined” a command upgrade training course and becoming disentitled to Command BPP. I agree with Mr Man that on the contrary, it is Ps’ construction that would lead to an absurd result which could not have been intended, since it would mean that an FO who did not want to do the work of Captain would be paid more (as he would be paid Command BPP based on passenger pay) than the person who took up the freighter-only command vacancy and did the work of Captain.

122.  Fourth, Mr Chua suggests that if a pilot refuses to take up a command upgrade course for what they see as a “good” reason (e.g. because he does not want to leave home, or uproot his family, or for income or tax reasons etc), then that should somehow not amount to “decline” under the BPP provisions. This was not Ps’ pleaded case. In any event, one may say “no” to something for good, bad or indifferent reasons, but one is still saying “no” i.e. declining something. The same applies to the argument that Ps had no right of abode in the UK so they are not eligible for vacancies with home port say, in Manchester. This is only to say that there could be more than one reason for declining the opportunity. It does not change the fact that they declined. Their ineligibility for certain freighter vacancies merely highlights the fact that Ps were not deprived of promotion opportunity to those command positions, in which case there is no reason why they should be compensated with Command BPP.

123.  Finally, as regards P4, Mr Chua contends that he was entitled to rely on clause 8.2 of PBPA 2006: see [64]-[66] above. It provides:

“Officers may elect to defer upgrade training until an upgrade course and a vacancy in the higher rank at the Home Base of their choice can be confirmed simultaneously. In these circumstances the Company will determine the type on which the Officer will upgrade. Such Officers will be deemed to have used their Joker.[5] Nothing in this Policy Agreement is intended to override Company Policy in respect of upgrade training prior to retirement.”

124.  It is therefore asserted that P4 has merely “deferred” but not “declined” to undertake command training.

125.  I reject this submission. Even if P4 has deferred his command training, he has clearly declined command training courses. He refused to 3 such courses offered to him in 2011. Clause 8.2 of PBPA 2006 merely allows him to insist on being promoted in his home base (whereupon he will be deemed to have used his “Joker”), and in such circumstances NZB will then be free to determine the aircraft type on which he will upgrade. Nothing in that clause says that his BPP entitlements would be kept alive if he elects to defer command training pursuant to clause 8.2. Therefore, the mere fact that P4 is exercising a right under clause 8.2 of PBPA 2006 does not change the fact that he has declined a command training course within the meaning of clause 9.3 of NZB COS-02. This makes perfect sense, as even if P4 is entitled to defer command training, when he elects to do so of his own volition, he has not been deprived of an opportunity of promotion by NZB, and should therefore not be paid Command BPP.

126.  In conclusion, I find as follows:

(1)  P1 would be ineligible for Command BPP from 1 January 2008 until 4 June 2012 (the day before he commenced his chosen B744 “current on type” passenger command course), given he had not bid for any freighter-only vacancies made available for the period since 1 January 2008. He should therefore only be paid Command BPP between 5 June 2012 and 25 August 2012, just shy of 3 months, instead of 17 months, of Command BPP which he did receive.

(2)  P2 would be ineligible for Command BPP from 1 January 2008 until 13 February 2012 (the day before he commenced his chosen B777 “current on type” passenger command course). He should therefore only be paid Command BPP between 14 February 2012 and 14 April 2012 (the day before he was promoted to Captain), thus just 2 months, instead of 15.5 months, of Command BPP which he did receive.

(3)  P4 would be ineligible for Command BPP from 13 October 2008 onwards (that being the date on which he turned down the command course for the freighter vacancy in Sydney) until the end of his employment in 2021. This was because he had turned down 3 more passenger command courses in 2011, and never accepted any offered course. He should not have been paid the 10 months Command BPP that he did receive.

D.3  Retirement age of 55 unenforceable under New Zealand law

127.  As a further alternative argument, directed at P4, Mr Man submits that no Command BPP is payable to P4 under clause 9.1 of NZB COS-02, because the “Retirement Age” of 55 set out in NZB COS-02 was held by the New Zealand Supreme Court to be unenforceable as a matter of law: David Brown and Glen Sycamore v New Zealand Basing Ltd [2017] NZSC 139. Clause 9.1 of NZB COS-02 necessarily presupposes that there is a retention of Captains beyond “Retirement Age”, being the age at which NZB could “legally” require a Captain to retire. The true “Retirement Age” would either be 65 (as per the Air Navigation (Hong Kong) Order 1995 (Cap 448C) which provides that no one can act as pilot in command or co-pilot of any aeroplane on a flight for the purpose of public transport after he attains the age of 65), or there is no true “Retirement Age” because there is no age at which NZB is contractually entitled to force a Captain to retire. In the alternative, on true construction, Command BPP is only intended to be payable if the 55-year-old “Retirement Age” is legally enforceable, and since it is not, no Command BPP would be payable at all.

128.  Given my conclusions above and also the discontinuance of NZB’s counterclaim against P4, it is not necessary for me to express any view on this issue and the rival arguments.

D.4  Conclusion on the Command BPP claim

129.  Ps’ Command BPP claim is dismissed.

E.  MISSED PAY STEPS CLAIM

130.  Ps claim that their Command BPP should have included annual salary increments of the rank of Captain, and that those pay steps incurred while on Command BPP should have been retained upon their actual promotion to Captain. They contend that the date on which they became entitled to receive BPP should have been taken as their “date of appointment to the relevant rank” – in effect, that the commencement of BPP entitlement represents a “deemed promotion”.

131.  Mr Chua accepts that the Missed Pay Steps claim stands or falls with the Command BPP claim. It was indeed pleaded as part of the Command BPP claim. Since the Command BPP claim cannot succeed, the Missed Pay Steps claim also falls away.

F.  PROMOTION DELAY CLAIM

132.  Ps claim that their promotions have been delayed by the recruitment of DEFOs and Freighter-only DEFOs (Rapid Command), in breach of clause 6 of CPA COS-99. Mr Chua made clear during trial that this head of claim only concerns the recruitment of Freighter-only DEFOs (Rapid Command).

133.  As a start, as Mr Man submits, it is difficult to see how Ps can complain about Cathay’s recruitment of DEFOs (Rapid Command). These freighter positions (in Hong Kong and elsewhere) were first advertised internally for bidding, and they would have been awarded in order of seniority to the pilots who bid for them. But Ps did not want these positions and (in some cases) were not even eligible for them (e.g. due to the lack of right of abode in the UK). It was in those circumstances that Cathay hired externally to meet its business demands. Mr Chua has not been able to articulate what Cathay ought to have done instead.

134.  More specifically, the recruitment of Freighter-only DEFOs (Rapid Command) consists of two stages: (1) recruitment of FOs by Direct Entry; and (2) promotion of these DEFOs to command positions on the freighter fleet after completion of their training package.

135.  Stage (1) is allowed under clause 6.1 of CPA COS-99: see [77] above. There is no express or implied obligation that precluded Cathay from hiring DEFOs externally, or requiring Cathay to first exhaust the pool of SOs before hiring externally. Chu J (as she then was) rejected a similar argument in Scott Williams v Cathay Pacific Airways Limited, HCLA 24/2009 (unreported, 10 November 2010) at [27]:

“Four points become clear from reading the two clauses together. First, under the contract, CPA may recruit DEFO instead of promoting SO. Second, CPA will normally only recruit DEFO when there are no SOs suitable for promotion. Third, CPA may recruit DEFO notwithstanding there are SOs suitable for promotion (i.e. other than in accordance with clause 6.2). One possibility of this happening will be when the situation is other than normal. In other words, CPA is entitled under clause 6.2 and/or clause 6.3 to recruit DEFO irrespective of whether there are SOs suitable for promotion. Fourth, it follows that the extent of the rights of the SOs under clauses 6.2 and 6.3 is that: (i) when there are SOs suitable for promotion, there will normally be no recruitment of DEFO; and (ii) if, notwithstanding the availability of SOs suitable for promotion, there is recruitment of DEFO, then the promotion of these SOs to JFO will not normally be delayed for more than 12 months while the recruitment is taking place.”

136.  In any event, the recruitment of DEFOs occurred in 2008, long after Ps were promoted to FO, so it could not have affected Ps who were more senior to those DEFOs.

137.  As for stage (2), there is no breach of any express term, whether under clause 6 of CPA COS-99 (which was the only pleaded clause) or otherwise. Clause 5.8 of CPA COS-99 makes clear that upgrade courses can be assigned out of seniority if there are insufficient suitably qualified volunteers. This was what had happened. Despite internal advertisements, there were insufficient Cathay volunteers to fly the freighter aircraft.

138.  In any event, the rapid promotion of DEFOs to freighter command vacancies did not delay promotion or adversely affect the career progression of Cathay pilots, including Ps. These DEFOs joined in 2008 at the bottom of the Seniority List, below Ps. Upon rapid promotion to freighter command vacancies, those Freighter-only Captains would be bonded to freighter flying for a minimum of 3 years. Even after that, they could not become Passenger Captains until they reached sufficient seniority in the Seniority List for command upgrade. All the DEFOs recruited from January 2008 onwards would be junior to Ps. The fact that those pilots had been flying freighter aircraft as Captains gave them no priority for Passenger command upgrade, which Ps wanted. There is thus no question of the DEFOs (Rapid Command) being parachuted above those higher on the Seniority List. The reality is that the freighter vacancies were advertised, but because insufficient number of Cathay pilots wanted them, Cathay had to hire from outside while placing them at the bottom of the Seniority List irrespective of their rank. In the circumstances, it is difficult to see how, as Mr Chua contends, it is obvious that promotion of DEFOs (Rapid Command) to Captains would delay the promotions of other FOs (including Ps) on the Seniority List, when such other FOs were not interested in taking up the freighter vacancies in the first place.

139.  The Promotion Delay claim is dismissed.

G.  SENIORITY ORDER CLAIM

140.  Ps claim that command upgrade training courses, and consequent promotion, were offered to pilots who were junior to them, out of seniority, in breach of clause 7.1 of CPA COS-99 and clause 6.1 of NZB COS-02.

141.  This head of claim turns on the proper construction of the governing contractual provisions in clause 7.1 of CPA COS-99 and clause 6.1 of NZB COS-02 (see [77] above), which relevantly provide that “selection of Officers for promotion to higher rank will be in accordance with seniority on the Officers’ relevant seniority list and is subject to a Selection Panel recommendation”. The clause merely requires Cathay to “select” officers for promotion in accordance with seniority, and not to actually promote them in seniority order. Any such selection is further qualified by the Selection Panel’s assessment. Therefore, once an officer has been selected for promotion according to seniority order, the offering of command upgrade training, and the timing and progress of the pilot’s training and eventual promotion, would then depend on the Selection Panel’s assessment, the availability of training courses and the pilot’s choice of course, and the pilot’s performance in the upgrade course and in the relevant line checks. Mr Man gives two examples as illustration:

(1)  If an FO is selected for promotion by seniority, but then persistently fails to be assessed as suitable for upgrade, then it cannot sensibly be concluded that this should hold up the promotions of any and all other pilots who are junior to that FO and have been selected for promotion after him.

(2)  If the FO is assessed as suitable for upgrade, but because of operational requirements no training courses for his preferred fleet for command upgrade are available, then that should not hold up the promotion of other pilots junior to that FO who are willing to take up the courses that are on offer.

142.  Mr Man further submits, and I agree, that it would be astonishing for any airline or employee to be taken to have agreed that actual promotion should be strictly in accordance with seniority, which is premised on a fundamentalist, near absolute view of seniority. This would both be unworkable and contrary to common sense. Cathay necessarily offers command training according to its business and operational needs for officers on different types of aircraft. Ps’ contention would effectively give pilots a contractual right to dictate when he takes the upgrade course, and what type he takes it on regardless of whether there is any business demand for that aircraft type. Equally it makes no sense that a pilot would sign up to a contract stipulating promotion strictly by seniority – this would deprive junior yet competent pilots of a fair opportunity to move up the ranks quickly. It would also hold junior officers’ career development hostage to the whims of a more senior pilot.

143.  There are other contractual provisions which support Mr Man’s construction. Clause 5.8 of CPA COS-99 provides that if Cathay has a requirement for officers to undertake upgrade or type transfer courses and there are insufficient suitably qualified volunteers, then Cathay may assign courses to suitably qualified officers out of seniority, in reverse seniority order. Clause 7.2(c) of CPA COS-99 also mentions that the number and timing of JFO upgrade courses “is dependent upon Company’s requirements.” These clauses make clear that there is no concept of absolute fundamentalist seniority in CPA COS-99.

144.  Further support may be derived from the 5 November 2020 version of the Employee Handbook for Pilots, which expressly provides under section 15(e) on “Promotion to a higher rank” as follows:

“Promotion from Second Officer to First Officer and First Officer to Captain will be at the sole discretion of the Company, taking into account factors such as seniority according to the Aircrew Seniority List, the Officer’s qualifications and suitability for the role, as well as the Company’s operational requirements.” (emphasis added)

145.  As to P1, the facts relating to his command grade have been set out in section B.3 above. There is no basis for any complaint about promotion out of seniority:

(1)  P1 was selected for promotion in seniority order. He was chosen for assessment by the Command Selection Panel on 6 December 2011 by seniority.

(2)  P1 complains that 3 colleagues with lower seniority than him were offered command training courses out of seniority, namely Ferguson DW, Epps DA and Clarke DT. However:

(a)  All three of them were assessed as Category A earlier than P1, even though they were selected to be assessed later than P1 in accordance with seniority.

(b)  Ferguson DW was awarded and commenced a “current on type” command course on the A330 on 14 February 2012, ahead of P1 (who commenced his course on 5 June 2012). But P1 would not have been eligible for this course, as he was on the B744.

(c)  Epps DA was awarded and commenced a “current on type” command course on the A330 on 17 April 2012, earlier than P1. But again, P1 was not eligible to take this course anyway.

(d)  Clarke DT was awarded and commenced a command course on the B744 “current on type” on 15 May 2012, ahead of P1. This was because Clarke DT was ready for promotion first, as he had attained Category A (on 9 January 2012) before P1 (on 6 March 2012).

(3)  P1 also complains about the cancellation of his simulator sessions, which he says led to his being assessed as Category U at the 6 December 2011 meeting: see [38] above.

(a)  Cancellation of scheduled command skills training modules on the simulator is not uncommon. There is no plea that the cancellation of similar sessions itself was in breach of contract – P1’s very late application to amend the Statement of Claim on day 10 of the trial (20 February 2023) to add a new plea complaining that Cathay had unilaterally cancelled his simulator sessions, failed to reschedule one on a timely basis, and belatedly re-scheduled the simulator sessions in January and February 2012, was dismissed by this Court on 23 February 2023. In any event there is no basis for such a contention. Further, in oral evidence, P1 stated that he did not ask for an earlier simulator session because there was “no need to do so”. He would “expect” it to be re-scheduled earlier. Given such an attitude, it is not open to P1 to complain about any “late” arrangement of simulator sessions.

(b)  P1 had failed an annual line check the previous year, which was also taken into account by the Command Selection Panel in its assessment of his suitability.

146.  As to P2, the facts relating to his common upgrade have been set out in section B.4 above. He accepted at trial that he had no complaint that officers junior to him on the Seniority List were promoted ahead of him, and that he should not have been mentioned as one of the parties making such a claim in the Statement of Claim. In any event:

(1)  P2 was selected for promotion in seniority order. He was chosen for assessment by the Command Selection Panel on 4 October 2011 by seniority.

(2)  Although there were 4 FOs junior to P2 who commenced command upgrade training earlier than him, they were on other fleets (B744 or A330), and were taking “current on type” courses. It matters not that P2 had previous experience on the B744 (as SO) and A330 (as FO). At the time when he was being upgraded, he was on the B777 – therefore obviously he could not have taken the B744 “current on type” or A330 “current on type” courses which the 4 FOs had taken.

(3)  Mr Chua in closing argues that P2 was not “fixated” on only taking a B777 “current on type” course. Instead, his primary concern was to get the earliest course available as he was expecting a third child. That may be what P2 had thought to himself but his email to Mr Denly Hau only mentioned B777 course, being his current type: see [56] above. It was plainly reasonable for Mr Hau to read P2’s email as meaning that he wanted B777 courses only, whatever P2’s true view might have been. In any case, as a B777 pilot, P2 would not be offered a “not on type” course. As Mr Hau explains in evidence, a “not on type” course takes 5 months (12 sessions) versus 3 months (7 sessions) for a “current on type” course; and for the training course, 2 pilots have to be paired up together, and neither of them can leave early. That would jeopardize the training plan and cannot be countenanced.

147.  As to P4, the facts relating to his common upgrade have been set out in section B.5 above:

(1)  P4 was initially assessed for command upgrade earlier than his seniority allowed, because he had bid for a freighter vacancy. Subsequently, he was selected for promotion on passenger aircraft in seniority order. He was chosen for assessment by the Command Selection Panel on 4 January 2011 by seniority.

(2)  P4 complains that over 100 officers junior to him were upgraded to Captain on the B777 ahead of him. However, they were all “current on type” B777 FOs, and P4 did not know of any “not on type” FOs junior to him (he himself was an A330 FO) who were offered a B777 command course ahead of him (such courses having not been available since May 2012). There were also no conversion courses from A330 to B777 for which P4 was eligible.

(3)  P4 declined 3 passenger command courses in 2011. Under cross-examination, he accepted that between June 2011 and April 2014, he wanted to stay in Auckland; that he was not entitled to Command BPP by reason of his decline; and that he was not complaining about not being offered courses elsewhere in the world during that time.

(4)  Although there were A330 “current on type” command courses available in Hong Kong in April 2014 which P4 could have taken, he said he did not want to remain on the A330 because he wanted to commute to New Zealand, and that could only be done on the B777 rosters. He also did not want to come to Hong Kong as an A330 FO for a conversion course to a B777 FO, even though this was an available route, because there was no guarantee that a B777 command upgrade course would be offered, and he did not want to give up his home base benefits. So there were routes to command upgrade open to P4, just that he did not want them.

148.  In conclusion, Ps’ complaint about promotion out of seniority could not be made out. The Seniority Order claim is dismissed.

DISPOSITION

149.  All of Ps’ claims against Cathay/NZB are dismissed.

COSTS

150.  Costs should follow the event. Subject to the costs of NZB’s counterclaim against P4 (which NZB should pay P4), Ps should pay the costs of Cathay and NZB in this action (including any costs reserved), to be taxed if not agreed, with certificate for three counsel.

151.  As to the scale of costs payable by NZB to P4 as regards its discontinued counterclaim, Mr Chua relies on 4 key matters justifying an award of costs on an indemnity basis:

(1)  NZB made the deliberate decision to file no witness statement for its counterclaim. NZB could not begin to discharge its onus on the merits (on unjust enrichment) and to postpone the limitation period which was necessary for the counterclaim. The only sensible inference is that it was not worthwhile to call any witness.

(2)  At the PTR, NZB maintained that its counterclaim would be pursued despite the lack of witness statement. That insistence was not reasonable, and led to very substantial time and costs incurred on the counterclaim, including the preparation and filing of P4’s 3^rd supplemental statement, which prove to be wholly unnecessary.

(3)  NZB’s counterclaim would divert attention from focus on the actions alone. A not insubstantial part of Mr Man’s written opening and case authorities concerned the counterclaim. This took up substantial time and costs for Ps, and wasted the Court’s very valuable time.

(4)  Prosecuting the counterclaim in such circumstances smacks of “bully and oppressive tactics” by a larger and resourceful employer to cause stress against an ex-employee, and smacks of ulterior motive and underhand conduct.

152.  In response, Mr Man made 5 main points to resist indemnity costs:

(1)  The counterclaim is not hopeless. P4 recognized the strength of the counterclaim by consenting to the re-amendments by which the counterclaim was pleaded, and sought leave after the PTR to file his 3^rd supplemental witness statement to deal with the counterclaim.

(2)  The mere fact that NZB did not file witness statements pertaining to the counterclaim does not mean it was hopeless. The unjust factor of mistake can be established by inferences from the undisputed facts or documents. The key piece of evidence for the counterclaim is the New Zealand Supreme Court judgment finding that the retirement age of 55 under NZB COS-02 was unlawful, and that does not require any witness statement to produce. It is inconceivable that NZB would make payments to its employees unless it believed it was legally required to do so. This point could be made out without necessarily any witness to testify to that at trial.

(3)  There is no basis to suggest that NZB’s litigation conduct is somehow improper or lacks moral probity.

(4)  The mere fact that the counterclaim was withdrawn late in the day does not justify indemnity costs. In any event, on any view, the counterclaim was never the primary focus of this action. It concerns the sum of NZD65,593.36 which is vastly lower than Ps’ claims (around HK$8.75 million) and P4’s own claim (over HK$4.1 million).

(5)  P4 has to come to Court to testify at trial irrespective of the counterclaim, and would have had to be subject to cross-examination in any event.

153.  I remind myself that an award of indemnity costs requires some “special or unusual feature”: Town Planning Board v Society for Protection of the Harbour Ltd (2004) 7 HKCFAR 114. Having considered the submissions of Mr Chua and Mr Man, whilst it is clearly undesirable for NZB to only withdraw its counterclaim on day 2 of the trial, I am of the view that no “special or unusual feature” has been demonstrated to justify an award of indemnity costs against NZB on its counterclaim. In particular, I do not believe I would be in a position to conclude that the counterclaim is hopeless either on the law or on the evidence. There is no sufficiently cogent evidence to support Mr Chua’s contention that NZB’s insistence on the counterclaim forms any part of “bully and oppressive tactics” against P4. I order NZB to pay P4’s costs of the counterclaim on a party and party basis, to be taxed if not agreed, with certificate for three counsel.

154.  Since P4 fails in his application for indemnity costs against NZB, he should pay NZB’s costs of his unsuccessful application for indemnity costs in respect of the counterclaim, on a party and party basis, to be taxed if not agreed. Submissions on costs could adequately be dealt with by one senior junior alone. I decline to grant any certificate for more than one counsel.

155.  It remains for me to thank all counsel and those instructing them for their assistance rendered to the Court.