HCA 6733/1999
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 6733 OF 1999
____________
BETWEEN
LAJOM, ESPERANZA CRUZ, suing on behalf
1st Plaintiff
CALLEJA, MARIA VICTORIA SANTOS, suing on
2nd Plaintiff
BIASPAL, SUSHIL DEV, suing on behalf of
3rd Plaintiff
and
CATHAY PACIFIC AIRWAYS LIMITED
Defendant
____________
AND
HCA 3377/2003
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 3377 OF 2003
____________
BETWEEN
LAJOM, ESPERANZA CRUZ, suing on behalf
1st Plaintiff
CALLEJA, MARIA VICTORIA SANTOS, suing on
2nd Plaintiff
BIASPAL, SUSHIL DEV, suing on behalf of
3rd Plaintiff
and
CATHAY PACIFIC AIRWAYS LIMITED
Defendant
(Consolidated pursuant to the Order of the Honourable Mr Justice Tang dated 6th April 2004)
____________
Before: Hon Reyes J in Court
Dates of Hearing: 22, 23 and 28 February 2005
Date of Judgment: 4 March 2005
_______________
J U D G M E N T
_______________
I. Introduction
1. Cathay employed the plaintiffs as flight attendants on 18 September 1989, 14 December 1993 and 6 February 1996 respectively.
2. The plaintiffs say that they are automatically entitled to an annual pay increment until they reach the ceiling grade of a salary scale attached to their employment contracts. The plaintiffs also say that Cathay may not unilaterally reduce the amount payable on any grade of an agreed salary scale. The plaintiffs complain that, as a result of Cathay so reducing the salary payable for a given grade, flight attendants have received less than they ought to have been paid upon moving up an applicable salary scale.
3. Cathay denies that the plaintiffs are entitled to an automatic increment. Cathay also asserts a contractual right unilaterally to vary any agreed salary scale, so long as the change does not result in a flight attendant receiving less pay than he received immediately prior to the change.
4. The main question before the Court is who is right. More particularly, the issues are as follows:-
(1)
Whether the plaintiffs' contracts of employment expressly or impliedly provide as the plaintiffs contend.
(2)
If not, whether Cathay is estopped from denying that the contracts provide as the plaintiffs contend.
(3)
To what extent (if at all) were the plaintiffs entitled to bring these proceedings as representative actions.
5. In setting out the background to this litigation below, I do not confine myself to matters which specifically relate to the plaintiffs' contracts. I also refer to periodic year-end negotiations and collective agreements between Cathay and the Flight Attendants Union (FAU) over salary benefits.
6. This is because the plaintiffs have all been, and (except for Ms. Calleja who no longer works for Cathay) continue to be, members of the FAU. The plaintiffs contend that their rights as employees and Cathay's obligations as employer should be understood against the backdrop of FAU’s negotiations. Indeed, the plaintiffs go further. They claim that statements made by Cathay in the course of periodic negotiations and collective agreements with the FAU are to be regarded as representations to flight attendants generally, whether or not members of the FAU.
II. Background
7. The earliest Conditions of Service (COS) produced at trial were those which came into effect on 1 July 1966.
8. Clause 3 of these 1966 Conditions (COS 1966) stated as follows:-
"BASIC PAY. An all-in monthly salary will be paid as follows:-
Hostesses Pursers
HK$
HK$
Probation
625
625
Balance of
1st Year
800
800
2nd Year
835
840
3rd Year
870
880
4th Year
905
920
5th Year
940
960
6th Year
975
1,010
7th Year
1,010
1,060
8th Year
1,045
1,110
9th Year
1,080
1,160
10th Year
1,115
1,210"
9. COS 1966 cl.4 further stated:-
"ANNUAL INCREMENTS. Increase of salary may be granted after each year of service up to a maximum of HK$1,150.00 per month to Flight Hostesses and HK$1,1210.00 per month to Flight Pursers for satisfactory service at the discretion of the Management.
10. Between 1966 and 1986, the amount payable in respect of each year of the basic salary scale and the allowances or additional salary payable to senior flight attendants were revised upwards annually, usually following discussion with the FAU, in line with increases in the cost of living.
11. Further, on 1 January of each year, flight attendants automatically advanced one grade up the currently applicable salary scale. Where a flight attendant or senior flight attendant had reached the final grade in his scale, he would remain at that level. His basic salary would then only increase by the percentage rise in cost of living attributable to his grade in the salary scale.
12. In general, year-end negotiations between Cathay and the FAU typically focused on the total percentage (inclusive of increase in cost of living and increment from advancing one year up the salary scale) by which flight attendants' pay should rise on average in the coming year.
13. At some point between 1966 and 1986, the reference in the basic salary scale to "Year" was altered to "Grade" and the number of grades grew from 10 to 18. Over the same period, the basic salary ladder evolved from a single into a double scale: one for cabin attendants running from a starting grade and then grades 1 to 18, and another for flight pursers (a higher rank than cabin attendant) running from grades 2 to 18.
14. On 1 January 1986 new Conditions of Service (COS 1986) came into effect.
15. COS 1986 cl.3 provided:-
"Salary and Allowances (Effective 1st January 1986)
(A) Salary Scales
Cabin Attendant
Flight Purser
Starting
HK$4,477
HK$ --
Grade 1
5,020
--
2
5,239
5,883
3
5,461
6,132
4
5,693
6,393
5
5,936
6,665
6
6,188
6,948
7
6,420
7,209
8
6,661
7,479
9
6,910
7,760
10
7,169
8,051
11
7,437
8,353
12
7,716
8,666
13
7,967
8,948
14
8,226
9,239
15
8,493
9,539
16
8,769
9,849
17
9,054
10,170
18
9,348
10,500
(B) Title Allowances
Per month
Per month
Flight Purser
HK$675.00
HK$750.00*
Senior Purser
1,350.00
1,500.00*
Chief Purser
(L1011)
2,700.00
3,000.00*
Chief Purser
(B747)
3,600.00
4,000.00*
*To be effective 1st July 1986
(C) Appointment Allowances
....
(D) Starting Salary
Starting Salary will be payable to cabin crew who join the Company between 1st January and 30th June in any calendar year, and will continue to be paid after completion of probation until the end of that calendar year. They will receive the Grade 1 salary with effect from 1st January of the following calendar year. Cabin crew who join between 1st July and 31st December will receive the Grade 1 salary after completion of probationary period."
16. COS 1986 cl.4 stated:-
"Annual Salary Increases
Salary Scales, Titles Allowances and Appointment Allowances will be reviewed annually and will normally take effect from the first day of each calendar year at the Company's discretion."
17. Reference was made at trial to provisions for maternity leave in various COS as an aid to construing Cathay's obligations. COS 1986 cl.24(D)(i) on the "Continuation of Benefits" stipulated that "seniority will continue to accrue during approved maternity leave".
18. In December 1986 Cathay and the FAU agreed that from 1 January 1987 the salary scale headings in COS 1986 would be amended from "Grade" back to "Year". There were to be other changes. "Cabin Attendant" would become "Flight Attendant", "Flight Purser" become "Senior Flight Attendant". Further, "Title Allowances" would henceforth be called "Rank Allowances". But parties stressed that neither anticipated any consequential effect from the revisions.
19. In December 1987 Cathay and the FAU agreed that from 1 April 1988 there would be a "Year 19" added to the Senior Flight Attendant salary scale.
20. In December 1987 Cathay also acknowledged the FAU's role in the following terms:-
"The Company fully recognises th FAU as representing Flight Attendants and provides considerable assistance to the Union in carrying out is activities including the provision of an office and associated services, payroll deduction of Union dues, access to the Company internal mail system and notice boards. All Flight Attendants are free to choose whether they wish to join the Union. The Company's recognition of the Union will be evident with a letter."
21. The letter referred to in the acknowledgment was sent to Mr. David Ngan, then FAU chairman, on 18 July 1988. In the letter Cathay confirmed that it "recognises FAU as the organisation representing its members in relation with the Company". The recognition was, however, expressly subject to a number of conditions including:-
"
3.
the membership of FAU comprising not less than 75% of the total number of cabin attendants of the Company except those in managerial positions,
....
7.
FAU acting in all respects in the best interests of its members and the Company."
22. In 1986, 1987 and 1988 Cathay raised the amounts corresponding to each grade of the flight attendant and senior flight attendant scales by a percentage reflecting the increase in the cost of living over the preceding year. Flight attendants continued to advance one grade up the applicable scale on 1 January of each year. Year-end negotiations with the FAU concentrated on the average total increase in salary benefits (including rise in cost of living and increment due to advancement) for a coming year.
23. By a letter dated 1 June 1989 Cathay offered to employ Ms. Lajom as a flight attendant. Her employment was to be subject to COS 1986.
24. The basic salary scale applicable to flight attendants and senior flight attendants in 1989 was attached to the COS 1986 provided to Ms. Lajom in her offer letter. There was a dispute among the parties on whether the attachment sent included the salary scale for 1988 by way of comparison. I find that, on the balance of probability and consistently with Cathay's practice, the salary scale sent to Ms. Lajom only showed the then current 1989 scale.
25. On 22 January 1990 Cathay and the FAU agreed that a Year 20 would be added to the Senior Flight Attendants salary scale with effect from 1 January 1990.
26. There was no year end negotiation between Cathay and the FAU in 1990. For 1991 Cathay implemented its own review and raised flight attendant salaries accordingly. Flight attendants automatically advanced one year up their basic salary scale.
27. From the early 1990s, in the face of greater competition among airlines, Cathay's relationship with the FAU became more strained. This resulted from efforts by Cathay's management to increase cabin crew productivity.
28. The end of 1991 saw some flight attendants take industrial action by not going to work as rostered.
29. On 24 December 1991 Cathay released an announcement entitled "ADJUSTMENTS FOR FLIGHT ATTENDANTS 1992". The document stated:-
"Salaries
Flight Attendants' basic salary scales will be increased by 11.8%. This COL [cost of living] increase results from taking the average of the moving average of the three published Hong Kong Indices CPI(A) [Consumer Price Index (A)], CPI(B) and Hang Seng for the last published 12 months. This figure is 11.77% which is rounded up to 11.8%.
This formula has been used for calculating Flight Attendants' COL adjustments for several past years. Individual Flight Attendants will be granted this basic scale adjustment plus the scale increment to which they are entitled. Details of the total increase can be determined from the salary scales shown in Appendix A.
For example, for a Dual Bar/Cabin (DBC) in Year 2 receiving an incremental increase to Year 3 on 1st January 1992, the salary will be increased from HK$7,984 to HK$9,301 per month, an overall increase of 16.49%.
A further example is that a Senior Purser (SP) in Year 6 will receive an incremental salary increase to Year 7 on 1st January 1992, from HK$10,515 to HK$12,246, an overall increase of 16.48%."
30. On 30 December 1991 Cathay made the following news announcement:-
"CABIN ATTENDANTS' DISPUTE (2)
In view of the disruption and uncertainty caused by action taken by some cabin attendants, and subsequent misleading information published in the Hong Kong press, Cathay Pacific is clarifying details of some of the more relevant issues.
1.
CX is offering cabin attendants an 11.8% cost-of-living adjustment, plus their normal increment entitlement on the appropriate salary scale. This amounts to a salary increase for the overwhelming majority of C/As [cabin attendants] of between 14.8% and 16.6%....."
31. In a letter to Mr. Ngan dated 9 January 1992, Cathay referred to the fact that the FAU had walked out of year-end negotiations in 1991 for 1992 salaries. Cathay concluded the letter thus:-
"In the meantime the Company must process the January payroll for cabin crew. This should, if possible, be based on the agreed new rates for 1992. I am therefore formally asking you to resume negotiations so that these new salaries can be agreed. If you decide that you will not resume negotiations then the Company will implement the proposal as table on 24th December, 1991 pending further discussions with you in due course. This is in accordance with our practice in the past, that when negotiations have not been concluded prior to the January payroll deadline we have made an adjustment to salaries as anticipated by the staff."
32. A collective agreement for 1992 pay was finally reached between Cathay and FAU on 7 April 1992. The agreement stated:-
"SINGLE MASTER PAY SCALE
It is agreed, with effect from 1st January 1992, that the current Flight Attendants' and Senior Flight Attendants' pay scales will be merged and that the levels will be as set out in Attachment 1. This will provide Flight Attendants with a better understanding of the actual salary structure in effect.
Flight Attendants will continue to progress one grade at the commencement of each calendar year upon successful completion of a year's work.
It is agreed that Flight Attendants who are promoted to the rank of Flight Purser will be moved up three grades on the now master pay scale upon successful completion of their training.
GRADUATED RANK ALLOWANCES
It is agreed that the present system of Rank Allowance payment does not accord recognition to a Flight Attendant's performance and experience in each rank holder category. The present system should be revised to better reflect the changing trends within the cabin crew structure such as the new Career Progression System which is geared towards recognising merit, dedication and productivity.
It is agreed that a system of Graduated Rank Allowances will be introduced that will better relate performance to reward.
Effective 1st May 1992 a five tier scale as set out in Attachment 2 will be introduced.
Flight Attendants will, upon successful completion of training, be paid at the first grade. Upon full and successful completion of three months probation Flight Attendants will progress to the second grade. Further progression will, for the time being, be dependent upon seniority, although subject to agreement a merit based system of progression may subsequently be introduced.
Additional grades to all rank allowance scales will be considered in future Year End negotiations. Changes to the amount of the allowances will take into account cost of living changes and job size."
33. The new combined salary scale which took effect from 1 May 1992 was as follows:-
"Grade
Salary
(S)
7,664
(C)
8,222
1
8,565
2
8,926
3
9,301
4
9,681
5
10,081
6
10,404
7
10,833
8
11,283
9
11,756
10
12,248
11
12,700
12
13,168
13
13,654
14
14,161
15
14,682
16
15,153
17
15,641
18
16,141
19
16,659
20
17,195
21
17,744
22
18,226
23
18,720"
Note that the combined salary scale used the heading "Grade" rather than "Year".
34. On 11 May 1993 Cathay and the FAU agreed revised amounts for each grade of the combined salary scale. This scale came into effect on 1 January 1993. Essentially, salary payable at each grade rose by between 7.07% and 16.06%.
35. By a letter dated 14 September 1993 Cathay offered to employ Ms. Calleja as a flight attendant.
36. Ms. Calleja initially signed an acknowledgment to the effect that her employment would be subject to COS 1986. But she later signed another acknowledgment making her employment subject to COS which came into effect on 1 July 1993. There is no dispute that her employment was subject to the latter COS 1993.
37. Relevant provisions of COS 1993 are as follows:-
"4. SALARY AND ALLOWANCES
A) Salaries and Allowances
Salaries and Rank Allowances are paid monthly in arrears at the rates which are published separately from time to time.
At the Company's discretion some Cabin Attendants may be offered Management Appointments. The allowances and terms for these positions are published separately from time to time.
B) Annual Salary Review
Unless the Company in its sole discretion determines otherwise, Salary Scales and Rank Allowances are reviewed annually and any change will normally take effect from the first day of the following calendar year.
C) Starting Salary
The Starting Salary will be payable to newly joined Cabin Attendants during their probationary period. Cabin Attendants who pass probation in the same calendar year as they join will receive the 'Confirmation' salary upon their appointment as Cabin Attendants being confirmed and will receive the 'Year 1' salary with effect from 1st January of the following year.
Cabin Attendants whose appointment as Cabin Attendants are confirmed in the calendar year following the one in which they join will receive the 'Year 1' salary after completion of their probationary period.
D) Salary Deductions
....
11. MATERNITY LEAVE
....
E) Continuation of benefits during Maternity Leave
a)
Seniority Number
Seniority will continue to accrue during maternity leave.
b)
Progression Number
Progression Number is one of the bases for a Cabin Attendant's progression or promotion to a higher rank or category. It is determined by the date that a Cabin Attendant completed their probation for their present category.
Progression Number will be adjusted as follows:-
i)
During probation
Progression Number not retained. Probationary Cabin Attendants may be required to rejoin a new Induction Training Course after their return from Maternity Leave.
ii)
Up to an including 5 years service
Cabin Attendants will be placed at the bottom of the progression list for their particular category on the date of resuming duty after maternity leave. For salary purposes, there will be no annual increment accrual but any salary scale adjustments will apply.
iii)
More than 5 years service
Seniority will continue to accrue for the entire period of maternity leave. Progression Number, however, will be frozen from the commencement of maternity leave until 6 months after resuming duty.
Cabin Attendants returning from maternity leave will not be eligible for consideration for promotion until they have completed six months service after returning from maternity leave...."
38. To the COS 1993 acknowledged by Ms. Calleja was attached the Combined Flight Attendants Salary Scale which came into effect on 1 January 1993. The attachment did not show the applicable pay scale for any year other than 1993.
39. Although there were year-end negotiations in 1993, no agreement was reached between Cathay and FAU for 1994 salaries. Cathay simply raised salaries in accordance with its review. Flight attendants continued to advance up a grade on the combined salary scale.
40. A year-end agreement was reached on 10 January 1995 for 1995 pay. The amount attributable to each grade on the combined salary scale was increased by between 6.00% and 13.28%. In addition, flight attendants advanced by one increment up the combined scale.
41. By a letter dated 3 January 1996 Cathay offered to employ Mr. Biaspal as a flight attendant. His employment was subject to COS issued in July 1995.
42. These COS 1995 provided as follows:-
"4. SALARY AND ALLOWANCES
A) Salaries and Allowances
Cabin Attendants will be paid a monthly salary in arrears at the rates which are published separately from time to time.
Cabin Attendants who have been promoted to Purser rank will be paid a monthly Rank Allowance in arrears at the rates which are published separately from time to time.
At the Company's discretion some Cabin Attendants may be offered Management Appointments. The allowances and terms for these positions are published separately from time to time.
B) Annual Salary Review
Unless the Company in its sole discretion determines otherwise, Salary Scales and Rank Allowances are reviewed annually and any change will normally take effect from the first day of the following calendar year.
C) Starting Salary
The Starting Salary will be payable to newly joined Cabin Attendants during their probationary period. Cabin Attendants who pass probation in the same calendar year as they join will receive the 'Confirmation' salary upon their appointment as Cabin Attendants being confirmed and will receive the 'Year 1' salary with effect from 1st January of the following year.
Cabin Attendants whose appointment as Cabin Attendants are confirmed in the calendar year following the one in which they join will receive the 'Year 1' salary after completion of their probationary period.
D) Salary Deductions
....
11. MATERNITY LEAVE
....
E) Continuation of benefits during Maternity Leave
a)
Seniority Number
Seniority will continue to accrue during maternity leave.
b)
Progression Number
Progression Number is one of the bases for a Cabin Attendant's progression or promotion to a higher rank or category. It is determined by the date that a Cabin Attendant completed their probation for their present category.
Progression Number will be adjusted as follows:-
i)
During probation
Progression Number not retained. Probationary Cabin Attendants may be required to rejoin a new Induction Training Course after their return from Maternity Leave.
ii)
Up to an including 5 years service
Cabin Attendants will be placed at the bottom of the progression list for their particular category on the date of resuming duty after maternity leave. For salary purposes, there will be no annual increment accrual but any salary scale adjustments will apply.
iii)
More than 5 years service
Seniority will continue to accrue for the entire period of maternity leave. Progression Number, however, will be frozen from the commencement of maternity leave until they have been back at work for a period of time equivalent to that spent away on maternity leave.
Cabin Attendants returning from maternity leave will be required to make up the time spent away before being considered for promotion/progress...."
43. To the COS 1995 sent to Mr. Biaspal was attached the Combined Flight Attendants Salary Scale for 1996. The attachment did not show the applicable pay scale for any year other than 1996.
44. Negotiations at the end of 1996 between Cathay and the FAU on salary levels for 1997 broke down. Cathay's Final Position Statement issued on 30 December 1996 stated as follows:-
"CX POSITION
Cathay Pacific recognises the important contribution made by our Cabin Crew to the continuing success of the Company. However, Cathay Pacific is facing serious challenges from rival airlines with better cabin crew productivity. In view of this fact, the Company proposed to offer non-contract cabin crew a salary scale and rank allowance increase of 2% in addition to normal salary scale and rank allowance increments of approximately 4% in return for acceptance of one or other of the following proposals for improvements in cabin crew productivity.
Option 1: Normal Salary Scale and Rank Allowance Increments (approximately 4%) plus Additional 2% Salary Scale and Rank Allowance increase for one more hour per month with EFP [Excess Flying Pay].
In return for accepting the possibility of working up to one (1) more hour per month (73 hours) without EFP, the Company proposed to offer non-contract Cabin Crew an increase in salary scale and rank allowance of 2% in addition to normal salary scale and rank allowance increments of approximately 4% as follows:....
Option 2: Normal Salary Scale and Rank Allowance Increments (approximately 4%) plus Additional 2% Salary Scale and Rank Allowance increase for changes to EFP rates and thresholds.
In return for accepting changes to EFP rates and thresholds the Company proposed to offer non-contract Cabin Crew an increased in salary scale and rank allowances of 2% in addition to normal salary scale and rank allowance increments of approximately 4% as follows:...."
45. The Final Position Statement was attached to a letter dated 31 December 1996 from Mr. Peter Buecking (Cathay's then General Manager Inflight Services) to all cabin crew. The letter read:-
"At the 1996 Year End Negotiations, despite the best efforts of both the CX Management Representatives and the FAU Executive Committee Representatives, we were unfortunately not able to reach agreement on a salary increase on top of normal annual increments in exchange for improvements to productivity.
....
In the absence of any agreement with the FAU Executive Committee, the company would nevertheless like to implement an increase in remuneration for our cabin crew, in addition to the annual salary scale and rank allowance increment, with some link to productivity and the principle of 'more work, more reward'.
We intend therefore to raise the rate of LDA [Line Duty Allowance] by 10% to HK$55 and HK$13.75 for LDA A and B respectively and to pay all non-contract crew a salary increase on top of their normal annual increment of 1%..."
46. The reference to "non-contract cabin crew" in the letter and Final Statement encompassed all cabin crew paid on a monthly basis, including the plaintiffs. From 1 September 1996 Cathay employed flight attendants under a different set of COS. This COS 1996 remunerated flight attendants by reference to line duty hours worked, instead of a monthly basic wage.
47. The 3 January 1997 issue of "Infauline" (an FAU newsletter) published the following comment by Ms. Lajom (then Hon. Secretary of the FAU):-
"CX Management was not willing to discuss any proposals on productivity improvements unless a deal on Excess Flying Pay (EFP) at 2% was agreed. The normal annual increment was never in question and was to have been given whether or not a deal was made.
Today, management has issued a notice to all cabin crew regarding the increase in remuneration i.e. a 1% increase in salary across the board, a 10% increase in LDA payments (the other 1% of the budget? ) and the normal annual increment (which we are entitled to anyway )."
Together with this notice they have enclosed a 'Final Position Statement'. Unfortunately, this 'Final Position Statement' is misleading...."
48. No year-end agreement having been reached for 1997 salaries, Cathay unilaterally reviewed flight attendants pay. The resultant 1997 salary scale increased basic pay at each grade by about 1%. Taking account of a 1 point increment advancement, flight attendants total basic salary rose by between 1% and 7.93%.
49. Against the background of the Asian financial crisis, the year-end negotiations in 1997 for 1998 salaries proved difficult. The positions of the FAU and Cathay are reflected in the following statement by Ms. Lajom in the 16 January 1998 issue of “Infauline”:-
"It was understood by both parties that YEN [Year-End Negotiations] this year would have to be conducted under some constraints because, as our Managing Director has put it, whole the company's balance sheet remains strong, (thanks to the very prudent conservative and solid financial practices of previous top management teams) the state of regional economies around Hong Kong, the down-turn in the local Tourism industry, and the recent scare about bird 'flu has all affected the airline's business negatively and that the revenue situation remains bleak.
For these reasons Cathay Pacific is prepared to offer to cabin crew a 5% remuneration increase (including regular annual increment), only in return for productivity improvements. This means that in the event that no agreements are reached on productivity improvements, only salary improvements will apply unless the company decides to give us the 1% payrise they are offering without any of our current agreements on cabin crew conditions and benefits being targeted."
50. In the end, the FAU balked at accepting an overall 5% pay rise in exchange for improvements in productivity. By letter dated 3 February 1998 Ms. Betty Kwan (then FAU Chairman) wrote to Cathay:-
"[W]e confirm that we are prepared to accept only an increment adjustment to the salary and rank allowances for 1998, with effect from 1 January 1998, for cabin crew who joined before 1 September 1996. However, we wish to reiterate the fact that Cabin Crew have not received payrise proportionate to increased level of service from the heart in recent years."
51. The 1998 Combined Salary Scale for flight attendants hired before 1 September 1996 therefore remained the same as that of 1997. Nonetheless, flight attendants all advanced one increment up the scale and received an overall basic pay rise of between 0% and 4.08% as a result.
52. On 16 December 1998 Mr. Thomas Wright (then Cathay's General Manager Inflight Services) wrote to flight attendants as follows:-
This is an important letter addressed to all cabin crew who joined before September 1996. Please take time to read it carefully because we are asking you to make some important decisions that affect you and the Company. If you have any questions please consult your Team Office, the special help desk and the crew lounge, Elaine Liu, Charles Carlow or myself. The contact numbers are listed in a separate attachment.
As you know the year-end bonus in respect of 1998 will be paid. Upon careful review by the Company and having close regard to the serious decline in our profitability and the general downturn in the marketplace we have concluded that it is not realistically possible to pay salary and rank allowance increases for 1999.
In my letter to you on 11 December 1998 I mentioned that in order to retain market share in an increasingly competitive environment, we need to make significant crew cost savings and at the same time address the concerns that you have raised to me.
We do have a surplus of crew in some categories. By staff agreeing to sign up to the Company proposal we can both manage crew surplus through a voluntary redundancy scheme and at the same time achieve major cost savings through increased productivity. It is because of such cost savings that we will be in a position to award a salary increase to those staff who voluntarily agree to undertake extra productivity. By adopting these measures we are confident that we can minimize compulsory redundancies and which we pledge to introduce only as an option of last resort.
In order to be able to meet the challenges that lie ahead we are offering cabin crew three voluntary choices:
Option 1.
1999 salary increases in return for productivity undertaking.
Option 2.
Voluntary redundancy scheme.
Option 3.
No increase in productivity -- salary frozen at 1998 levels.
Option 1. 1999 salary increases in return for increased productivity undertaking.
1.
An increase in salary for 1999 equivalent to 3.5%.
2.
An increase in monthly threshold from 72 to 76 hours per month and a corresponding increase in annual threshold from 760 to 798 hours per annum.
3.
Where you are rostered more than 76 hours, you will be paid the difference between the new threshold and 80 hours on the basis of 100% of the hourly rate. Any hours in excess of 80 hours will be paid at 200% of the hourly rate. Annual EFP will be paid at the rate of 100%.
4.
These changes would start in the March 1999 roster.
5.
All other Conditions of Service remain the same.
Option 2. Voluntary Redundancy Scheme (VRS)
If you do not wish to take up Option 1, a VRS is offered on the following conditions:
1.
You will receive a voluntary redundancy payment based on 2/3 of monthly salary x Years of Service (monthly salary includes basic salary and rank allowance), or 17 months' salary whichever is less.
2.
Retirement benefits will be calculated as per normal resignation benefits (cessation of service) and would be in addition to the voluntary redundancy payment indicated above.
3.
Acceptance and the timing of a final date of employment through the Voluntary Redundancy Scheme is at the Company’s discretion, to ensure that services are not disrupted and will take into consideration such things as length of service, date of joining and so on.
Option 3. No increase in productivity -- salary frozen at 1998 levels.
You may elect to remain on your current Conditions of Service if you do not wish to agree to the terms under which the 1999 salary increase are being offered or to take up voluntary redundancy. However you should be aware that you would not receive any increase in salary or rank allowance for 1999 if you do so.
Although the Company has pledged to do its utmost to avoid introducing compulsory redundancies, in the event of doing so, individual performance and comparative productivity are factors that may be taken into account in determining which staff are to be let go.
Please sign up for one of the above options by 16 January 1999.
This is an important moment for you and the Company. You face some important choices: help the Company in this difficult time; leave on a generous voluntary redundancy package; or not participate in the recovery plan."
53. On 24 December 1998, in a subsequent letter to flight attendants, Mr. Wright made it clear that henceforth there would be no automatic advancement of 1 point up the combined salary scale upon completion of a year's service.
54. Thus, for example, the 3.5% under Option 1 represented the total increase which a person choosing that alternative could anticipate. As for those choosing Option 3, "[h]aving regard to the current economic environment, it is simply not possible to forecast what will happen in year 2000 or beyond and how increments or salary increases may be paid".
55. Mr. Wright also pointed out that there was no Option 4. Those who chose none of the available alternatives, would be deemed to have elected Option 3.
56. The plaintiffs all asserted an entitlement under their respective COS to an annual increment up the 1998 salary scale on completion of a year's service. They rejected all options. Cathay treated them as having chosen Option 3.
57. On 23 February 2000 Cathay announced an overall salary and rank allowance of between 2.97% and 4.46% for flight attendants who chose Option 1. For those who went for Option 3, Cathay gave "an additional increment of 1%".
58. For the year 2001, Cathay and the FAU agreed an average pay rise of 4% for Option 1 crew, a 1% rise for Option 3 crew.
59. The latter 1% pay rise was effected by treating an Option 3 flight attendant as moving up by one grade and revising the pay attributable to that higher grade to an amount which was 1% more than the pay previously received by the flight attendant.
60. The result was that the Option 3 flight attendant received more in 2001 than he had received in 2000. But he received less than he would have done under the 1998 scale (where the average difference between any grade and the next higher grade was 4%). Further, by reference to the 2000 salary scale applicable to Option 3 flight attendants, the amount attributable to the next higher grade on the 2001 scale could be less than the amount stated for that identical higher grade in the 2000 scale.
61. A comparison of the 2000 and 2001 scales for Option 3 crew (as downloaded from Cathay's internal website) is as follows:-
Salary Point
2000
2001
HK$
HK$
1
10,703
10,708
2
11,140
10,810
3
11,595
11,251
4
12,064
11,711
5
12,543
12,185
6
13,044
12,668
7
13,566
13,174
8
14,113
13,702
9
14,685
14,254
10
15,272
14,832
11
15,764
15,425
12
16,330
15,922
13
16,916
16,493
14
17,527
17,085
15
18,163
17,702
16
18,816
18,345
17
19,408
19,004
18
20,018
19,602
19
21,296
20,218
20
21,969
20,852
21
22,659
21,509
22
23,264
22,189
23
23,883
--
24
--
23,497
25
--
23,883
62.. Note that the scales refer to what were previously called "Grades" as "Salary Points". The 2000 scale has two figures for Salary Point 23. A footnote to the 2000 scale explains that "[t]he second point 23 is for the purpose of maintaining parity only". The 2000 scale also includes a note that "[t]he monetary value assigned to attached incremental and rank points is for the year 2000 calendar year only". The 2001 scale has only one Salary Point 23, but it has new Salary Points 24 and 25.
63.. The FAU agreed to the 2001 salary scale in the 2000 year-end negotiations. By a letter to Cathay dated 21 December 2000, the FAU stated:-
"Before signing the Agreement, we would like to set the record straight that although HCA 6733 of 1999 was not a matter negotiated upon, both parties understand that the signing of this Year End Negotiation Agreement would not howsoever prejudice any cabin crew's legal entitlement arising out of the said Court case.""
64. Ms. Lajom switched to Option 1 in March 2001. But in doing so, she continued:-
"to assert my legal entitlement to the automatic annual advancement by one grade/point in all applicable salary scales after completion of every calendar year of service and all applicable rank allowance scales upon every anniversary of my rank".
65. Ms. Calleja retired from Cathay on 1 April 2001 on medical grounds.
66. Mr. Biaspal remains on Option 3. He has received more pay from increases for Option 3 crew in 2001 and later. He says that his pay is less than what it should be under the 1998 scale. He has also lodged a similar disclaimer to that of Ms. Lajom.
67. At the end of 2001 Cathay had about 3,425 cabin crew who were working on pre-September 1996 COS and 1,700 on post-September 1996 COS. Of the pre-September 1996 fight attendants, some 380 were working on the basis of Option 3.
III. Discussion
A. Contractual obligations
68. The plaintiffs allege 2 terms:-
(1)
That the plaintiffs are entitled to progress by one grade up the relevant salary scale upon completion of each year of service.
(2)
That the amount attributable to any grade on a relevant scale may not be reduced.
69. By relevant scale, I mean the salary scale applicable to the respective plaintiffs between 1989 and 1998. As seen in Section II of this Judgment, after 1998 Cathay claimed that a flight attendant had no automatic entitlement to advance one grade at the end of each year.
70. On a year to year basis, the scales in use between 1989 and 1998 show increases in the amounts attributable to each grade. The plaintiffs do not complain about the salary scales in use before 1999.
71. From 1999 onwards, Cathay asserted that the amounts attributable to any individual grade could be decreased at its discretion, provided that a flight attendant's overall basic pay was no worse off than before. Thus, if in 2001 a plaintiff received 1% more pay than before as a result of advancing one point on the 2001, Cathay says that it has not breached its contractual obligation. It is irrelevant (Cathay argues) that the increased salary corresponding to the one point advance is less than the salary for the equivalent grade in the 1998 scale. Cathay submits that the salaries stipulated at higher grades or points in any given scale are mere expectations and have no contractual effect.
72. I now examine the parties’ positions on the individual terms more closely.
A.1 Automatic annual advancement
73. In my judgment, the plaintiffs' contracts provided for automatic advancement at the end of each year of service. Once a flight attendant reached the final grade of the salary scale, there would be no further advancement, unless new grades were created. The salary of a person on the final grade would only rise by any annual cost of living or other revision in the amount attributable to that last grade.
74. The conclusion set out in the previous paragraph is an inevitable consequence of the inclusion of specific salary scales with the COS 1986, 1993 or 1995 sent to the plaintiffs.
75. Mr. Huggins SC (appearing for Cathay) argues that there are "simply no words" in the various COS to indicate an intention that flight attendants are to advance one grade at the end of every year.
76. But, as Mr. Scott SC (appearing for the plaintiffs) submits, the salary scales must be legally operative, since on their face they express themselves to be "effective from" a particular date. Further, cl.4 of both COS 1993 and 1995 provides that salaries are paid monthly in arrears in accordance with a relevant published salary scale.
77. One asks oneself, if the salary scale attached to a COS did not constitute a binding promise to be paid at least the amount stipulated alongside each year of service, what function did the salary scale have?
78. Mr. Huggins is at pains to point out that the "Grades" or "Years" on a salary scale are not the same as "Ranks". Movement from one grade to another does not involve "promotion". But, if so, what was the salary scale intended to show? Why did the contracts sent to the plaintiffs not just mention a starting salary and state that pay increases were subject to annual review?
79. Mr. Huggins suggests that the attached salary scales only indicate what a flight attendant might "expect" to receive on an annual basis as he continued to work for Cathay.
80. However, this suggestion is unconvincing. What Mr. Huggins labels a mere "expectation" is supposed to act as an incentive to an employee to work with dedication for his employer. If Mr. Huggins is right, the expectation may be dashed at any time by the employer refusing advancement up the scale at the end of a year's service and giving some lesser raise or no raise at all. It sits uncomfortably with the contractual nature of the COS as a whole, to include with it a sheet of paper which is intended to be little more than an "expectation".
81. At the very least, there is an ambiguity as to what the inclusion of a salary scale with the COS sent to the plaintiffs was intended to be, a mere expectation or a binding commitment. In such a case, the inclusion of the scale must be construed contra proferentem against Cathay, the author of the standard terms (including attached salary scale) found in the COS.
82. Mr. Huggins refers to cl.4 of COS 1986 and cl.4B of COS 1993 and 1995.
83. He concedes that the express word "discretion" found in the provisions did not entitle Cathay unilaterally to review the scales. Closely read, the word "discretion" in those clauses only related to the date when any change to salary scales or rank allowances was to take effect. Changes should normally take effect on the first day of the year, but such date is subject to Cathay's discretion.
84. Nonetheless, Mr. Huggins argues that the verb "review" in those clauses meant that Cathay could determine from year to year not just the amount corresponding to each grade in a scale, but also the manner in which the scale operated.
85. In my view, there are problems with Mr. Huggins' construction.
86. None of the clauses identified can be construed in a vacuum. They must be read in the context of a COS as a whole. That would include the attached scales, showing salaries against grades or years. If the scales cannot be characterised as mere "expectation", any inherent power of "review" must be constrained by the matters stated in the scales sent with the COS.
87. It is possible for an employer and employee to agree that the employer has a unilateral right to reduce the employee's salary. But otherwise an employee's pay is sacrosanct. It is assumed that an employee will not normally agree to an employer having the right to reduce it. In the absence of clear words to that effect, the Court will not read a contract as granting the right to reduce pay at the employer's discretion.
88. Given the inclusion of the scale in the COS sent to the plaintiffs, it would be reading far too much in the word "review" to construe it as Mr. Huggins wishes. Without clearer words, any review under cl.4 and 4B cannot override the promise implicit in the scale that upon completion of a year of service, an employee will move up the scale and receive the salary corresponding to that higher point on the scale.
89. In the case of COS 1993 and 1995, there is a further difficulty for Mr. Huggins.
90. Clause 11(E)(b)(ii) of both COS expressly states that, for crew who go on maternity leave between completion of probation and year 5 of service, "no annual increment ... will apply". Those employees will only receive any cost of living adjustment in the amount attributable to their current grade.
91. The natural inference is that, but for such an express term in cl.11(E), a flight attendant would be entitled to "an annual increment" and advance up the salary scale. Otherwise, if there was no contractual right to an automatic step up the salary scale, what would be the point of expressly denying an annual increment to those who go on maternity leave before completing 5 years of service?
92. No equivalent term is stipulated for those who go on maternity leave during probation. The term is unnecessary in such case. If a flight attendant goes on leave during the 6 months' probation, it is hard to see how she could complete her probation training. Indeed, she "may be required to rejoin a new Induction Training Course after ... return from Maternity Leave". She cannot advance into the "Confirmation" grade or grade 1 until she has completed her training.
93. Contrast cl.11(E)(b)(ii) with (iii) (where a person has served for more than 5 years and goes on maternity leave). The latter sub-clause is silent on annual increment. This must be because it goes without saying that the relevant person will continue to receive an annual increment. This circumstance points strongly to the annual increment or advance up the salary scale being a contractual obligation, rather than a mere expectation.
94. To the above analysis, I would add 4 footnotes.
95. First, Mr. Scott invited me to infer from the history recounted in Section II above, that "Year" and "Grade" were used interchangeably. Mr. Scott concludes from this that, whenever "Grade" or "Year" appear on salary scales, they may be regarded as synonymous.
96. In my view, Cathay plainly understood "Grade" and "Year" to mean the same thing.
97. At the time Ms. Lajom was hired the word "Year" was used in the 1989 salary scale. This strengthens a reading of Ms. Lajom's contract as embodying a contractual promise of automatic advancement for every year of service.
98. By the time Ms. Calleja and Mr. Biaspal were hired, the term "Grade" had re-appeared on the salary scale. But this must have meant the same thing as "Year," especially in light of cl.11(E) as discussed above.
99. Second, between 1989 and 1998 the salary scales originally sent to the plaintiffs were revised upwards. These changes were mostly, but not always, arrived at after negotiations between Cathay and the FAU. However, it does not follow, simply because a salary revision was accepted by the FAU, that a particular flight attendant’s contract is varied accordingly.
100. The revisions as proposed by Cathay constituted offers by Cathay to pay individual flight attendants in accordance with new scales. The plaintiffs accepted the offers by their conduct in continuing to work for Cathay without objecting to the new scales. The plaintiffs were better (or at least no worse) off with the new salary scales proposed by Cathay up to 1998. Acceptance by the plaintiffs of such scales by way of variation to their original terms of service is therefore unsurprising. Cathay is now bound to pay the plaintiffs in accordance with the Combined Salary Scale for 1998, not because the FAU agreed the 1998 salary scale, but because the plaintiffs individually agreed the variation.
101. Third, I have reached my conclusion on the meaning of the plaintiffs' contracts by reference to express terms. Mr. Scott argued that I should imply a term of automatic advancement. If I had held against Mr. Scott on construction, I would have had difficulty implying a term of automatic advancement. I do not believe that such a term has to be implied as a matter of business efficacy.
102. Fourth, it might be suggested that no employer in his right mind would agree a contract where, regardless of performance or merit, an employee received an automatic increment for each year of service until the "crack of doom" (Mr. Huggins' expression). The contention is that such a construction is absurd.
103. I do not agree.
104. In construing a contract, the Court may look at the factual matrix. One can have regard to all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contracting.
105. One such background circumstance would have been inflation. The late 1980s and early 1990s were a time of inflation. In that economic environment, it would not have been odd for parties to have assumed that the cost of living would be moving ever upwards, albeit in some years more than others. It was not until the advent of the Asian financial crisis in around 1997 that Hong Kong people became alive to the possibility of significant and sustained deflation.
106. Against that backdrop, one can plausibly imagine persons contracting on a belief that prices would generally be rising, rather than falling. Oblivious to deflation, an employer might readily offer an annual increment in order to attract the most suitable employees.
A.2 Reduction of grade amounts
107. Given the analysis in Section III.A.1 above, it follows that the amounts corresponding to any grade of the 1998 Combined Salary Scale are binding on Cathay. They cannot be reduced except with an employee's consent.
108. The plaintiffs must be treated as automatically advancing one grade up the 1998 scale (the last scale agreed by them as a variation to their contract of employment) every year. Upon advancement, the plaintiffs must be paid at least the amount attributable to the new grade in the 1998 scale.
109. To the extent that a plaintiff's pay (whether under the 2000, 2001 or any other salary scale) has been or is below that shown against the plaintiff's appropriate grade in the agreed 1998 salary scale, Cathay would be in breach of its contract.
110. The scope of any review under cl.4 of COS 1986 or cl.4B of COS 1993 and 1995 cannot reduce the amounts attributable to the grades of the operative 1998 salary scale. In effect, the review can only leave the amounts shown on the 1998 scale as before or increase them.
111. In Ms. Lajom's case, the heading to COS 1986 cl.4 ("Annual Salary Increases") makes this explicit. I do not understand Ms. Lajom to be arguing that, annual increment apart, she is entitled to a pay increase at every review, even when she reaches the ceiling grade of her salary scale. But the heading to cl.4 instead must at least mean that, on any exercise of the review power under that provision, salaries or scales cannot be reduced.
112. The foregoing is sufficient to dispose of Cathay's point on reduction of the amounts corresponding to a grade.
113. Nonetheless, there is a further point that has troubled me which I note here.
114. I have doubts on the logical coherence of Cathay's case on the absence of an automatic increment and the existence of a right to reduce amounts for each grade. I do not think that in practical terms Cathay can consistently maintain both limbs of its argument.
115. Cathay accepts that it cannot reduce an employee's basic pay so that he receives less in year n+1 than he did in year n. Cathay concedes that none of its COS have clear enough words to confer such draconian power of unilateral reduction.
116. Assume now that Cathay is correct that there is no automatic right of annual advancement by one grade. Assume also that at the outset (as here) the incremental difference between one grade and the next higher grade on an applicable scale is approximately 4%.
117. Consider the situation where Cathay in year n+1 decides to reduce the salaries attributable to each grade of the year n scale by 1%. Accordingly, the pay for each grade in the scale for year n+1 will be 1% less than the pay for the same grade in year n.
118. But that would mean a flight attendant P receiving $x at grade m in year n, would only be getting 99% of $x in year n+1. P would be suffering a reduction in basic pay which Cathay accepts that it cannot inflict.
119. Cathay's way out seems to have been to advance P to the next higher grade (m+1). P would then receive a higher salary in year n+1 than in year n. Nevertheless, such pay might be less than that which he would have received at grade m+1 on the year n salary scale. Thus, whereas on our starting hypothesis the difference between pay at grades m and m+1 of the year in scale was 4%, the difference in P's pay between years n and n+1 might be a mere 1%. This is because Cathay would fix the pay for grade m+1 in year n+1 at an amount equal to P's salary in year n plus 1%. Cathay would do so regardless of what pay might have attributable to grade m+1 in year n.
120. Now imagine that, in year n, flight attendant Q has reached the ceiling of the salary scale. There is no possibility of an incremental advance for Q in year n+1. If in year n+1 Cathay reduced pay in all grades by 1%, Q would only be receiving 99% of his salary in year n+1. Cathay would wrongly be reducing Q's basic pay.
121. A comparison of the 2000 and 2001 scales reproduced in Section II above, indicates that Cathay sought to avoid this problem in 2 ways.
122. Initially, Cathay sub-divided grades. For instance, in 2000 Cathay had two of Salary Point 23. Effectively, someone in Q's position was "advanced" to the second Salary Point 23 in order "to maintain parity".
123. Then, Cathay created new grades. In 2001 Cathay replaced the second salary Point 23 with a new Salary Point 24 and created a new Salary Point 25. Presumably, the latter point was to cater for persons (if any) who had "advanced" to the 2000 year second Salary Point 23 (renamed salary Point 24).
124. It seems that Cathay can only sustain its right to reduce the amount attributable to a grade if it periodically creates salary points to accommodate those who have reached the ceiling of a given year. If there is a long period of salary deflation, Cathay may have to continue creating new grades. It is true that a new salary point might not have to be established in every year. Through resignation of staff or crew switching from Option 3 to Option 1, there might not be a flight attendant in the ceiling grade in a given year. But, in general, especially in a time of prolonged deflation, the corollary of Cathay's position would be an expansion of salary points.
125. More particularly, it would be difficult (if not impossible) for Cathay to exercise a right to reduce amounts attributable to each grade across the board unless:-
(1)
annual advancement of flight attendants to a higher grade point is assumed; and,
(2)
new ceiling points are regularly created or sub-divided.
The system as envisaged by Cathay may not work without these 2 conditions.
126. The first condition leads to contradiction. Automatic annual advancement is denied by Cathay.
127. As for the second condition, from time to time, usually on the initative of the FAU, Cathay has increased the number of grades on its scale. But it does not seem to me on the available evidence that Cathay contemplated an ever elastic scale system, with salary points capable of being multiplied indefinitely.
128. Indeed, if grades could be ceaselessly increased, there would be little point to a salary scale. One returns to the question which I raised at the start: If Cathay's contentions are right, what function does attachment of a salary scale to a COS serve? The scale would be a mere fiction. Cathay could obtain the same result by simply saying in any given year that flight attendants will be receiving a salary rise of x or y or 0 per cent.
129. For this reason, I do not think that Cathay can be right in its construction of the plaintiffs' contracts.
130. Before concluding my analysis of Cathay's COS, I should summarise what appears to have happened with the Option 3 salary scale after 2001.
131. In the 2002 scale for Option 3 crew, Cathay established a Salary Point 26.
132. For 2003, Cathay granted Option 3 flight attendants a basic salary increase of 0.5%. Flight attendants were moved up one point on the scale. The amount attributable to this higher point was approximately 0.5% of previous basic pay. The scale remained at 26 points.
133. The latest salary scale for Option 3 crew in the trial bundle was that for 2004. Option 3 flight attendants were granted a 0.5% increase by Cathay. They advanced up by one point and the amount attributable to that higher point was approximately 0.5% of their previous basic monthly salary. The scale remained at 26 points.
A.3 Conclusion on contractual obligations
134. The plaintiffs' contracts expressly provide for automatic advancement every year by one grade, until the ceiling grade is received.
135. Where a salary scale has been agreed whether as part of the original contract of employment or later as a variation, Cathay cannot unilaterally reduce the amount payable for a given grade on the agreed scale.
136. Insofar as Cathay has denied the plaintiffs automatic advancement in any given year or sought to pay the plaintiffs less than they would have been entitled to receive at their appropriate grade levels in the 1998 salary scale, Cathay has been in breach of contract.
B. Estoppel
137. The plaintiffs say that, if their employment contracts do not provide as they contend, Cathay is estopped from denying that they do so provide. The plaintiffs rely in essence on estoppel by convention.
138. In light of my conclusion in Section III.A above, it is unnecessary for me to consider this argument. But I should briefly set out my views on estoppel on the footing that my construction of the plaintiffs' contract is wrong.
139. There are 4 elements to an estoppel by convention:-
(1)
The parties must have been under a common, but mistaken assumption as to a state of affairs or point of law.
(2)
The mistaken assumption must have been communicated by the parties to each other.
(3)
The parties must have regulated their dealings with each other on the basis of their mistaken assumption.
(4)
It would be unconscionable to allow one party subsequently to resile from that mistaken assumption.
140. I think that the first element would have been present in this case.
141. The plaintiffs' contend that all parties thought that the advancement up the salary scale was a flight attendant's right under pre-September 1996 COS.
142. As is apparent from the background material in Section II above, Cathay regarded an annual increment as not only "normal," but in December 1991 it also went so far as to characterise an annual increment as something to which flight attendants were “entitled”. Cathay has also referred to the annual increment as something “anticipated” by staff. See, for instance, paras. 29, 30, 31, 32, 44, and 45 above.
143. I have referred to Ms. Lajom's comments in “Infauline” to the same effect. See paras. 47 and 49 above.
144. In their witness statements, all 3 plaintiffs said that at the time of contracting it was their understanding that they would advance as provided in the salary scales sent to them, depending on their years of service. There was no suggestion in cross-examination that such statements were self-serving or untrue.
145. As for the second element, I would have found that the mistaken assumption had been communicated by the parties to each other.
146. Cathay plainly told its flight attendants in December 1991 that, as far as it was concerned, there was an entitlement to an annual increment. Regular dealings with flight attendants, whether through the FAU or otherwise, appear to have been conducted on the basis that an increment was "normal".
147. Given that the employer was conducting itself on the basis that an annual increment was a matter course, it is hard to believe that an employee would have thought otherwise. This is particularly so when between 1991 and 1998 Cathay repeatedly affirmed to the FAU that the increment was "normal" and the plaintiffs were all active in the FAU.
148. For the same reason, I would have found that the 3rd element was present. Clearly, the parties regulated their dealings with each other until 1998 on the basis that an annual increment was "normal".
149. I would also have found the fourth element.
150. Mr. Huggins suggests that there can be no unconscionability. None of the plaintiffs had applied for any other job between the time they were hired and at least 2000. Nor is there any evidence of their having foregone any job or other opportunity to remain with Cathay.
151. However, I bear in mind, at least by way of analogy, what Connell J pointed out in Lee v. GEC Plessey Telecommunications [1993] IRLR 383. At §§118-9, he said:-
"Where, in the context of pay negotiations, increased remuneration is paid and employees continue to work as before, there is plainly consideration for the increase by reason of the settlement of the pay claim and the continuation of the same employee in the same employment.
The situation is similar with an increase in the severance payments made to those who lose their employment due to redundancy, for a redundancy payment is part of the remuneration package. The employee continues to work for the employer, thereby abandoning any argument that the increase should have been greater and removing a potential area of dispute between employer and employee. The employer has both secured a benefit and avoided a detriment (see Williams v. Roffey Bros. and Nicholls (Contractors) ltd. [1991 1 QB 1]."
152. It seems to me that the mere fact of continuing to work for Cathay is sufficient detriment to found an estoppel by convention here. A flight attendant remains in his employment in the mistaken belief that he will at least be rewarded with an automatic increment after each year of service in accordance with a given scale. Had he known (on the hypothesis now under consideration) that there was actually no entitlement to an upgrade, the flight attendant would presumably at least have argued for more secure remuneration. By continuing to work instead, he abandoned a potential area of dispute between himself and Cathay. Dispute might have led to negotiation and that may have secured better remuneration. By foregoing any argument on the matter, the flight attendant incurred a detriment, while Cathay obtained a benefit.
153. Citing Hiscox v. Outhwaite [1992] 1 AC 562, Mr. Huggins submits that, even if there is an estoppel, that can only apply until 1999 when Cathay made it clear that there was no automatic right to an increment. From 1999 onwards, there is no reason (on the footing that I am wrong in my construction of the plaintiffs' contracts) why Cathay should pay annual increments. The mistaken assumption (Mr. Huggins says) is spent.
154. I am not persuaded by the submission.
155. It is true that in Hiscox (at 575G) Lord Donaldson MR said:-
"[O]nce a common assumption is revealed to be erroneous, the estoppel will not apply to future dealings"
But the question is what constitutes "future dealings"? The answer must depend on the facts of each case.
156. The plaintiffs agreed the 1998 salary scale and continued to work on the basis of the promise of future payments held out by the scale. The consequence of the estoppel should therefore be continued payment in accordance with that scale. If in the future the plaintiffs wished to be paid on some more generous scale, then for that dealing the estoppel could no longer operate. At the time of negotiating a new scale, the assumption of an automatic entitlement will be known to be wrong.
157. Payments, whether now or later, pursuant to the 1998 scale could not constitute the "future dealings" referred to by Lord Donaldson. The plaintiffs have bound themselves to work for Cathay in accordance with their mistaken assumption as to the 1998 scale. To say that from 1999 (or some other later date) the assumption no longer operates and the plaintiffs can be paid on some other basis, strikes me as the very inequity which the doctrine of estoppel by convention was meant to forestall.
158. For the above reasons, even if I had not found for the plaintiffs on the construction of the contract, I would have held for them on estoppel by convention.
159. Mr. Scott contended that Cathay's December 1991 statement of an entitlement to an annual increment was a representation which by itself gave the plaintiffs a right of action. Cathay (Mr. Scott submitted) should not be allowed to resile from the representation.
160. If Mr. Scott is right, that would mean than a representation which generates an estoppel, can be used as a sword, not just as a shield. Such proposition is not consonant with present law. I reject the argument.
C. Representative capacity
161. There is no dispute that, at least as to the true construction of COS 1986, 1993 and 1995, the present action was rightly brought as a representative action. It would have made little procedural sense for hundreds of flight attendants to bring individual actions for the construction of their contracts of employment. That would have led to duplication in costs and been an unnecessary drain on Court time and resources.
162. But, on the question of estoppel by convention, I do not believe that my judgment can apply to any flight attendants other than Ms. Lajom, Ms. Calleja and Mr. Biaspal. As Megarry J observed in J. A. Bollinger SA v. Goldwell [1971] RPC 412 (at 420):-
"Estoppel raises what is essentially an individual type of issue; and without saying that the presence of a plea of estoppel makes it impossible for those putting forward the contention to do so in a representative capacity, I can see great difficulty in most cases proceeding in such a way."
163. Consider, for instance, my discussion of the elements of estoppel by convention. I have relied in my judgment on evidence by the 3 named plaintiffs of their personal understanding when signing their contracts. Other flight attendants may have had different understandings.
164. Further, in the case of the 3 named plaintiffs, Cathay is not pursuing any case of waiver. But Cathay might still wish to argue that other attendants conducted themselves in such a manner (by an act of waiver or otherwise) that there would be no unfairness in allowing Cathay to resile from any mistaken assumption as to annual increment. Any such submissions by Cathay would hinge on the peculiar circumstances of individual persons. It would not be convenient or appropriate to deal with those arguments by way of a representative action.
165. In my view, these proceedings should only be regarded as representative insofar as the construction of employment contracts based on COS 1986, 1993 and 1995 is concerned. I do not think that my judgment can be regarded as touching on other flight attendants as far as estoppel by convention is concerned.
166. Nor do I think that these proceedings can be regarded as representative insofar as the question of breach by Cathay in relation to other flight attendants is concerned.
167. As Mr. Huggins has pointed out, in individual cases it may be open to Cathay to raise novation, waiver or some other defence on the question of breach. For example, consider a flight attendant employed under COS 1986 who chose the redundancy package under Option 2 in 1999. It might be argued that, in exchange for a “generous” package, such person has either waived or agreed to give up any claim against Cathay based on the 1998 salary scale. The named plaintiffs apart, the circumstances of breach in individual situations can only be evaluated on a case by case basis.
IV. Conclusion
168. The plaintiffs succeed in their actions against Cathay. Cathay's counterclaim in each action is dismissed.
169. The plaintiffs do not seek damages, but instead seek declarations. I will hear counsel on the appropriate wording of those declarations.
170. To assist counsel in formulating any declarations, I would indicate the following:-
a)
I am amenable to making declarations on the proper construction of COS 1986, 1993 and 1995 in respect of:-
i)
a flight attendant's right of automatic advancement by one grade annually; and,
ii)
limits on Cathay's ability to reduce the amounts attributable to a grade on a relevant salary scale.
b)
I am also amenable to a declaration that, in respect of the plaintiffs, Cathay has acted in breach of contract by denying advancement under the 1998 salary scale and by paying less than the salary corresponding to relevant grades of that scale.
c)
For the reasons in Section III.C above, I do not think that I can declare that Cathay has generally acted in breach of contract in respect of all flight attendants employed under COS 1986, 1993 and 1995.
d)
The Amended Statement of Claim in HCA 6733/1999 seeks declarations in relation to rank allowance entitlements. Little or no time was spent by either side, whether in evidence or submission, on rank allowance scales. My impression was that the plaintiffs were more concerned about basic salary scales. It seems to me that the parties rightly regarded the outcome of any dispute on rank allowances as hinging on the result of the dispute over salary scales. The same principles would be applicable. If so, is there any real need for declarations on rank allowances?
171. I shall also hear counsel on costs.
172. To assist counsel on costs, I would indicate the following:-
a)
Save on the appropriateness of a representative action in relation to questions of estoppel and breach, the plaintiffs have prevailed. In principle, they should have the costs of the claim and counterclaim in both actions.
b)
But I am minded to exclude the costs of preparing and photocopying Exhibit Bundles A, B, C and D for the trial. Those bundles did not comply with directions given at the pre-trial review. Cathay's solicitors instead had to prepare Consolidated Bundles A and B, comprising all documents (including exhibits to witness statements) in chronological order. Exhibit Bundles A, B, C and D therefore were an unnecessary incidence of costs.
173. Should counsel wish to address me on other consequential matters, I shall hear them as well on such.
174. There shall be a general liberty to apply.
(A. T. Reyes)
Mr. John Scott SC and Mr. Jason Pow, instructed by Messrs. Fairbairn Catley Low & Kong, for the Plaintiffs.
Mr. Adrian Huggins SC and Mr. Robin McLeish, instructed by Messrs. Johnson Stokes & Master, for the Defendant.