XCHRX HONG KONG FOUR SEAS TOURS LTD. v. WONG YUEN SHEUNG

IN THE SUPREME COURT OF HONG KONG

LABOUR TRIBUNAL APPEAL NO. 74 OF 1996

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J U D G M E N T

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THE FACTS

1. This is an application for leave to appeal from an award by the Labour Tribunal to the employee of an annual bonus of $17,000.00. The relevant facts found by the Presiding Officer were not in dispute. The employee had commenced employment with the employers on 4th June 1991. She was continuously employed by them until 7th January 1996. By the time her employment ended, she was earning a salary of $17,000.00 a month. On the ending of her employment, she was not paid the annual bonus of $17,000.00 for 1995 which she claimed was due to her.

2. Her entitlement to an annual bonus arose from para. 7 of the letter which contained the terms of her employment. It read :

"A bonus equivalent to one month salary will be provided upon completion of 12 months services calculated basing on the 31st December of each year; or in direct proportion if lesser, and shall be released in the beginning of August of the following year to staff who is then still under employment with the company."

THE PRESIDING OFFICER'S REASONING

3. The route by which the Presiding Officer came to his conclusion that on these facts the employee was entitled to be paid the annual bonus for 1995 was as follows. It was not disputed that the employee was employed under a continuous contract within the meaning of section 3(1) of, and the First Schedule to, the Employment Ordinance (Cap. 57) ("the Ordinance). Moreover, the annual bonus provided for by para. 7 was an "end of year payment" within the meaning of section 11A of the Ordinance because it was an "annual bonus of a contractual nature". Accordingly, subject to the argument deployed today by Mr. Kevin Hon for the employers, Part IIA of the Ordinance applied to the employee : see section 11B(1) of the Ordinance.

4. For the purposes of this case, there are two relevant provisions in Part IIA of the Ordinance. The first is section 11C. That provides :

"The payment period in respect of which an end of year payment is payable under this Part shall be ... the payment period specified in that behalf in the contract of employment."

In the light of that, the payment period in the present case was the period in respect of which the bonus was payable. Accordingly, the payment period was 1st January 1995 to 31st December 1995. The second provision is section 11E(2). That provides :

"Where the contract of employment of an employee to whom this Part applies who has been employed for the whole of a payment period is terminated after the expiry of the payment period but before the end of year payment becomes due on the day specified in the contract, the end of year payment shall, notwithstanding that a day is so specified, become due to the employee ... on the day on which the contract of employment terminates."

Since the employee had been employed for the whole of the payment period, i.e. for the whole of 1995, the annual bonus became due to her on 7th January 1996, and had to be paid to her by 14th January 1996 at the latest. Since it had not been paid to her at all, the employee's claim in the Labour Tribunal was bound to succeed.

THE EMPLOYERS' ARGUMENT

5. The point taken by the employers is that section 11B(1) of the Ordinance only applies "[s]ubject to any agreement to the contrary". Mr. Hon contends that there was an agreement to the contrary. On its true construction, para. 7 only required the employers to pay the employee an annual bonus for 1995 if she continued to remain in her employment until 1st August 1996. To the extent, therefore, that there was an agreement to the contrary, Part IIA, and in particular section 11E(2), did not apply to the employee.

6. I do not think that this point is arguable for two reasons :

(i) I reject the construction of para. 7 contended for by Mr. Hon. I construe para. 7 as being in two parts. The first part of para. 7 up to the words "if lesser" created the employee's entitlement to an annual bonus. The second part of para. 7 related to when the annual bonus to which the employee was entitled was payable. However, para. 7 dealt with when the bonus was payable only in the case of employees who remained in their employment until 1st August. It was silent as to when the bonus was payable if an employee left his or her employment before 1st August. I acknowledge that there was evidence before the Presiding Officer that the bonus was designed to be an incentive to employees to stay in their employment, i.e. continuing in employment until 1st August was intended by the employers to be a pre-condition for payment of the bonus. However, I do not think the language of para. 7 managed to achieve that effect. In those circumstances, there was no agreement to the contrary which prevented the triggering of the application of section 11E(2).

(ii) In any event, the words in section 11B(1) "[s]ubject to any agreement to the contrary" cannot apply to a provision in a contract relating to the date when an end of year payment is due. That is because section 11E(2) applies "notwithstanding that a day is so specified". Mr. Hon's argument gives those words no effect at all.

CONCLUSION

7. For these reasons, I have concluded that it is not arguable that the Presiding Officer erred in law in the conclusion which he reached. This application for leave to appeal must therefore be refused.

(Brian Keith)

Judge of the High Court