HONG KONG AIRCREW OFFICERS ASSOCIATION v. CATHAY PACIFIC AIRWAYS LTD.

1994, MP No.476

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HEADNOTE

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COLLECTIVE AGREEMENT - INTENTION TO CREATE LEGAL RELATIONSHIP-SUBJECTIVE EVIDENCE OF INTENT INADMISSIBLE - EVIDENCE OF FACTUAL BACKGROUND KNOWN TO THE PARTIES AT OR BEFORE THE DATE OF CONTRACT, INCLUDING EVIDENCE OF THE "GENESIS" AND OBJECTIVELY THE "AIM" OF THE TRANSACTION ADMISSIBLE CONSTRUCTION OF AGREEMENT-AGREEMENT UNENFORCEABLE FOR LACK OF AN INTENT TO CREATE LEGAL RELATIONSHIP

1994, No.MP476

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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1. This is an application by a staff association, the plaintiff, against the employer of its members, the defendant, seeking to enforce the provisions of, what has become known commonly as, a collective agreement, that was executed between the said parties on 5 March 1993. The said agreement was the result of a 3 year negotiation between the staff and the management to set up a new basings system for staff having their home country outside Hong Kong ("the Basings Agreement"). Prior to the establishment of the new basings system, Hong Kong was the only base for all captains, flight engineers and first officers; irrespective of the country of origin of such officers. Such officers were, consequently, employed on expatriate terms with additional benefits to alleviate the hardship of being based in Hong Kong. The new basings system made it possible for such officers to be based in bases to be established in North America, Europe, and eventually, Australia. The new system would ensue to the benefit of both sides; cost saving for the management in view of the reduction of expatriate benefits, and the opportunity to reside in one's own resident country for officers who came from abroad.

2. In the Basings Agreement, the parties envisaged the incorporation by the defendant of a new wholly owned subsidiary company to take over the employment of those officers who opt to transfer to the new basings system. This was subsequently materialised in the incorporation of Veta Limited. Pursuant to the new scheme, the defendant will enter into an agreement with Veta making provisions for the officers of the latter to be employed on certain conditions of service agreed between the plaintiff and the defendant. Consequently, the defendant entered into an agreement dated 1 April 1993 ("the Veta Agreement") and a supplemental agreement dated the same date though executed on 30 July 1993 ("the Supplemental Agreement") with Veta. The new basings system was implemented in relation to crews of the B747-400 as envisaged. However, soon after its implementation, disputes broke out between the plaintiff and the defendant over the issues of, inter alia, extension of the basings system to the B747-200/300 fleets ("the classics fleet") and to Australia. In the event, the plaintiff brought these proceedings to seek enforcement of the Basings Agreement against the defendant alleging that the defendant was in breach of several of its provisions.

3. Counsel have, most helpfully, framed the issues for consideration by the court. Though, the issues as framed by the parties are not identical in terms, there is no real distinction in substance between them. They are:

1. Whether the Basings Agreement is legally enforceable as between the plaintiff and the defendant?

And, if the Basings Agreement is legally enforceable -

2. Whether it is terminable unilaterally by the giving of reasonable notice? If so, whether the 3 month notice given by the defendant to the plaintiff effectively terminated the said agreement?

3. Was the defendant in breach of the provisions therein contained as alleged by the plaintiff?

4. Is the defendant precluded from offering basings to its officers other than in accordance with the Basings Agreement?

5. Propriety of the relief sought by the plaintiff?

Enforceability of the Basings Agreement

4. The only aspect about legal enforceability of the Basings Agreement the parties put before the court for decision is the issue of an intention to create legal relationship. It is the plaintiff's case that the parties intended to enter into legal relationship when they executed the Basings Agreement. In the premises, the agreement is legally binding on the parties thereto and enforceable in a court of law. The defendant contended that there was a lack of any intention to create legal relationship. The Basings Agreement is thus binding in honour only and would not give rise to a right to seek any legal redress in a court.

5. When the agreement itself made it plain as to whether any legal effect is to be brought about by the agreement, the clear intention as expressed by words in the agreement is usually conclusive as to the intent of the parties. However, the courts have held that there exist 2 categories of agreements the nature of which would give rise to a compelling conclusion, unless otherwise established by evidence to the contrary, as to the intention of the parties over the creation of legal relationship. Agreement of a social or domestic nature, that inevitably drives one to the conclusion that such agreements are not intended to create legal relationship save in exceptional circumstances, is one. Agreement of a commercial nature made between businessmen, that invariably compels one to conclude that unless special circumstances existed it is intended to be legally binding, is the other. In both cases, no more than a prima facie inference would be raised by the nature of the agreements. Such an inference can be rebutted by evidence of special or exceptional circumstances that justify a different conclusion as to the intent of the parties. I find myself in the same position as Lane J. in Ford Motor Co. Ltd. v. A.E.F. [1969] 2QB 303, having to consider the enforceability of a collective agreement. He observed, at pages 321 and 324, that :

" The fundamental question is of course this: assuming for the moment that there does exist an agreement in the broad sense between the plaintiffs on the one hand and the two defendants on the other, are those agreements enforceable by legal process in this court or not? There is a dearth of direct authority on the point. This is perhaps hardly surprising, because most cases in this branch of the law fall plainly into one or other of two categories. Either they are commercial contracts between parties at arm's length, which are obviously intended to be enforceable at law unless the parties by express provision declare that they are binding in honour only, or otherwise they are social or domestic arrangements which are equally obviously not designed to be legally binding - the type of arrangement whereby one person says to another, "I will meet you at 7.30; you bring the food; I will bring the drink"; neither party of course envisages any action in the county court if either commodity is not forthcoming, although it would presumably be possible by express provision to make even such an agreement legally enforceable. In other words, the intention of the parties is usually obvious from the surrounding circumstances or from the express terms of the contract itself..........

In the present case there is no express provision by the parties to provide any assistance as to their intentions. Consequently, it is necessary to look at all the surrounding circumstances to ascertain what the intention of the parties was. This, in my view, is not a case where, without further ado the situation falls into one or other of the categories which I have mentioned previously. Consequently, one must look at all the surrounding facts in order to discover what the intentions of the parties were."

6. It is trite law that though evidence of the surrounding circumstances and the actual knowledge of the parties, and consequently their respective state of mind, at the time when the agreement was made is admissible on the issue of the intent of the parties; subjective evidence of the actual intent cannot be given by the parties subsequently at the hearing. Such evidence is self-serving and only comes into existence after the making of the agreement. Lord Wilberforce held in Prenn v. Simmonds [1971] 1 WLR 1381, at 1385, that "evidence of negotiations, or of the parties intentions .......... ought not to be received, and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the "genesis" and objectively the "aim" of the transaction". It is in agreement with such eminent judicial opinion that I reject evidence contained in the various affidavits as to the actual intention of the parties on the legal enforceability of the agreement.

7. The plaintiff, however, contended that declarations or statements against one's interest are admissible to prove intent though they are made subsequent to the making of the agreement. The defendant rightly confined its objection to such a proposition not in principle but only to the circumstances of the present case. It is contended by the defendant that as the parties are mere legal persons, they can only act and think through their officers. It is submitted that it is impossible to receive evidence of the intention of the parties from any particular officer representing the parties at the negotiation table when such parties were represented by a number of officers on each side. As observed by Lord Wilberforce in Prenn, evidence of the objectives or intention of a party is not helpful. He commented at p.1385:

"........ the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact...... And if it can be shown that one interpretation completely frustrates that object, to the extent of rendering the contract futile, that may be a strong argument for an alternative interpretation, if that can reasonably be found. But beyond that it may be difficult to go: it may be a matter of degree, or of judgment, how far one interpretation, or another, gives effect to a common intention : the parties, indeed, may be pursuing that intention with differing emphasis, and hoping to achieve it to an extent which may differ, and in different ways. The words used may, and often do, represent a formula which means different things to each side, yet may be accepted because that is the only way to get "agreement" and in the hope that disputes will not arise. The only course then can be to try to ascertain the "natural" meaning. Far more, and indeed totally, dangerous is it to admit evidence of one party's objective - even if this is known to the other party. However strongly pursued this may be, the other party may only be willing to give it partial recognition, and in a world of give and take, men often have to be satisfied with less than they want. So, again, it would be a matter of speculation how far the common intention was that the particular objective should be realised."

8. The alleged declarations against interest come in two forms; those contained in the affidavits filed on behalf of the defendant and those contained in correspondence exchanged subsequent to the execution of the Basings Agreement. The contention in Mr. Samios's affidavit that the defendant had not given any consideration as to the issue of legal enforceability during the negotiation cannot be taken to be a declaration against interest as it merely establishes that the defendant has no definite intention one way or the other. I do not believe it would be helpful to go through a forensic analysis of the wordings of Captain Clemmow's letters as if they were statutory instruments. I accept the views expressed by Lord Wilberforce in respect of such evidence. I am of the view that the affidavits of Mr. Samios and the letters of Captain Clemmow, or the letter of the plaintiff putting on record what was alleged to have been said by the representatives of the parties at a meeting held on 15 February 1994, would only have very marginal value on the issue to be decided by the court even if they are admissible and can be said to be helpful. Viewed against the natural meaning of the Basings Agreement and the surrounding circumstances of the agreement, such evidence can have little, if any, effect on the issue.

9. It can hardly be disputed that the first and primary piece of evidence to consider in this issue is the document itself. The foremost task of the court is to ascertain the natural meaning of the document to seek out what the common intention of the parties was at the material time. The "recital" to the Basings Agreement emerges as a useful indicator as to the intent of the parties. In the first paragraph, when the purpose and general outline of the scheme are being referred to, words like "will" and "shall" were used. In the second paragraph, when the timetable for the implementation of the scheme is dealt with, more uncertain words like "envisaged" and "subject to successful introduction" were used. The same reluctance to be tied down inflexibly can be found in the third paragraph in words such as "as soon as possible and practicable" or "it is the intention to include". Most significantly, when the agreement comes to deal with the obligation by the defendant to enter into an agreement with Veta (yet to be incorporated at that time), it says "subject to professional advice it is envisaged (my emphasis) that the new Company and CPA will sign a contract which will cover, inter alia" the thereinafter set out conditions of service. It is the plaintiff's case that the plaintiff at least, if not also the defendant, was assisted by lawyers in the drafting process to ensure the final draft that was signed reflects the true intent and spirit of the agreement reached between the parties. Had there been any intention that the defendant was legally bound to enter into the said agreement with Veta in terms of the 12 provisions particularised therein, one would have expected stronger and more positive words such as the defendant "agrees", "undertakes" or "promises". It is of significance to find the obligation that "CPA will sign" should be qualify by such an aspirational expression as "it is envisaged". Reading the "recital" as a whole, one must be driven to the inevitable conclusion that the qualification of "envisaged" was deliberate and not an unfortunate and inadvertent wrong choice of word, or a mere careless or meaningless reference as contended by the plaintiff. I am satisfied that the said qualification was a conscious decision with the intent to indicate the degree of commitment the defendant was prepared to undertake under the Basings Agreement. It is evident from the "recital" that the agreement does not intend to bind the defendant to perform the same as a legally binding agreement enforceable in a court of law.

10. When the contents of the agreed conditions of service are considered and analysed, some of them no doubt resemble terms of a formal legally binding contract. As a matter of fact, most were in fact incorporated into subsequent conditions of service of the officers. However, they are not really that helpful as compared with the fourth paragraph of the "recital". It is not the defendant's case that such conditions are too uncertain and vague to be enforceable (though perhaps doubts do exist in respect of a few of such conditions). The fact that the said conditions resemble a legally binding contract is neither here nor there. Such a phenomenon is equally consistent with the natural meaning of the fourth paragraph of the "recital". It must be the case that the 12 conditions should take on a more legal and formal form as it is the clear intention that the agreement to be made between the defendant and Veta, which should cover those conditions; and the conditions of service that would be offered by Veta to its officers which would incorporate such conditions, should be legally binding as between the defendant and Veta, and between Veta and its employees. Without a definite and unequivocal promise in the fourth paragraph of the "recital" to enter into such an agreement with Veta to procure Veta to offer those conditions of service to the officers, the format of the agreed conditions of service set out thereafter, however close it resembles a formal legally binding contract, cannot give rise to any inference for the existence of such a promise. In the premises, the style and format of the 12 conditions cannot come to the aid of the plaintiff to tilt the scale in its favour. Taken as a whole, the Basings Agreement is, upon a true construction of the natural meaning of the document, no more than a declaration of an intent on the part of the defendant to enter into an agreement with the new company which will cover the agreed conditions of service. That is the same as saying that the agreement was considered to be binding in honour only.

11. I do not find the actual decision in Ford Motor to be of such assistance as the parties believe it has. The decision turned on the facts of the case. Lane J held at p.330:

"The fact that the agreements prima facie deal with commercial relationships is outweighed by the other considerations, by the wording of the agreements, by the nature of the agreements, and by the climate of opinion voiced and evidenced by the extra-judicial authorities. Agreements such as these, composed largely of optimistic aspirations, presenting grave practical problems of enforcement and reached against a background of opinion adverse to enforceability, are, in my judgment, not contracts in the legal sense and are not enforceable at law. Without clear and express provisions making them amenable to legal action, they remain in the realm of undertakings binding in honour."

However, the range of matters considered by the court in that case is a helpful indicator as to matters that a court should and could look at in a determination of this issue. I readily accept Mr. Tang's submission that actual knowledge of the persons representing the management and labour as to the overwhelming public opinion on unenforceability as well as evidence that the parties had given evidence to a royal commission previously to the same effect distinguish that case from the present. I have no hesitation to hold that the courts in Hong Kong should only look at the circumstances prevailing locally and not abroad in another domain having quite different social, cultural, economic and political environment from ours. The fact that the common law of Hong Kong is founded on English common law is of no assistance here.

12. Is there anything in the surrounding circumstances that displaces the natural meaning of the Basings Agreement? I believe not. The agreement took 3 years to negotiate. Lawyers were engaged prior to approval of the final draft. No doubt much time and efforts were spent in arriving at the said conditions of service. Apparently both parties intended the agreement to be acted upon after such great efforts had been incurred to arrive at a mutually acceptable scheme. The application would be to the benefit of both sides and afforded protection to the officers in the changeover of the identity of the employer. And the bulk of the conditions was in fact implemented in the subsequent conditions of service offered by Veta. But these considerations are not inconsistent with a mutual understanding that the agreement would be binding in honour only and be enforceable by means other than through the courts. I am not satisfied that taken as a whole they are sufficient to outweigh the natural meaning of the fourth paragraph of the agreement. It must be obvious to both parties that the real weapon in the arsenal of the labour side in an industrial dispute is a strike, and not enforcement by court order the terms of contracts of employment that can be terminated by giving reasonable notice or payment in lieu. The ultimate weapon on the management side is one of dismissal, whether for cause or by reasonable notice or payment in lieu, rather than any attempt for specific enforcement by a court order of any provision of the collective agreement. The real threats behind any collective agreement are dismissal and strike. It is blatant to both sides that the solution lies not in going to the court. The solution in any industrial dispute between the management and labour over a collective agreement, as distinct from one between the employer and an individual employee over a contract of employment, is to be found at a negotiation table. It will certainly require strong evidence to ask a court to believe any realistic and reasonable party to a collective agreement will ever believe in the effectiveness of redress in a court of law for industrial disputes over such an agreement. In the absence of clear words in the collective agreement itself or cogent evidence from the surrounding circumstances indicative of the true intent of the parties to such effect, it would be illusory to conclude that parties to such an agreement intended legal interpretation and enforcement of their agreement. Hong Kong does not have any developed trade union/industrial relations legislation or environment. Industrial relations, as distinct from individual employment contracts, are not specifically regulated by the law. In the premises, the assistance a court can offer in resolving industrial disputes over collective agreements effectively or satisfactorily is very limited, if existed at all. It would be naive to assume that the parties would not be aware of such facts. The acute absence of collective agreements being brought to these courts is indicative of the fact that either collective bargaining is still very much in its infancy or that parties do not see the court as being capable of providing a solution to their problem. Mr. Tang commented that declarations can be sought over interpretations of a collective agreement and one can rely on the integrity of the individual and his respect for the law to honour a declaration of rights by the court. He is forgetting that we are dealing, in the scenario before us, not with a dispute between an employer and an employee. In the sort of industrial disputes under consideration, i.e. over collective agreements involving trade unions, the livelihood of many and not just a few, and the profit or even survival of a company are at stake. I have no doubt that both parties to the Basings Agreement, being represented by educated and sophisticated professional people, recognised that the said collective agreement was never meant to be legally enforceable. The clear intention, which explains the peculiar way the Basings Agreement was worded, must be for the agreement to be binding in honour only though both parties clearly desired and envisaged it to be carried out. As Scrutton L.J. in Rose and Frank Co. v. J.R. Crompton & Bros. Ltd. [1923] 2 KB 261 at 288, observed -- "But I can see no reason why, even in business matters, the parties should not intend to rely on each other's good faith and honour, and to exclude all idea of settling disputes by any outside intervention, with the accompanying necessity of expressing themselves so precisely that outsiders may have no difficulty in understanding what they mean." Here the parties have, in my view, clearly expressed their intent not to be legally bound by crouching the Basings Agreement in such a way as to leave no doubt as to that intent. The surrounding circumstances further reinforce objectively such an intent. There is no doubt in my mind that the conclusion I have reached as to their intent is the only reasonable and proper one to draw in the circumstances.

13. It was also submitted by the plaintiff that the conditions of service agreed in the Basings Agreement had been incorporated into the terms and conditions of service of the officers with Veta or the defendant. I have not been referred to any part of the conditions of service of Veta or the defendant that would give rise to any incorporation by reference. The plaintiff places reliance on the fact that some of the said conditions of service set out in the Basings Agreement were in fact expressly incorporated into the Veta or defendant conditions of service. I believe such a fact disproves an implied intention of incorporation of provisions deliberately left out and not expressly incorporation, rather than support the plaintiff's contention to the contrary. In any event there is no claim for ratification of the Veta or defendant conditions of service on grounds of mistake or a failure to give effect to the true intent of the parties. The second fact relied on by the plaintiff is to be found in a letter dated 6 July 1994 from Mr. Samios to the officers of the defendant. In a paragraph of that letter, Mr. Samios stated:

"CPA intends to abide by the provisions in the original Basings Agreement in terms of the employment of all aircrew who have already gone, or are approved to go on a base, which includes you. As a further protection, CPA proposes that specific provisions of the Basings Agreement which are not currently in your Conditions of Service will, if you wish, be inserted into those Conditions of Service. This will mean that you will have the specific provisions of the Basings Agreement applicable to your personal contract of employment with the Company. This will give you far greater protection than did the existence of the Basings Agreement between the Association and CPA."

14. The letter would be sent to those officers who had opted to go on a base. The letter is clearly an offer for express incorporation, at the wish of an individual officer, of provisions in the Basings Agreement not currently in the existing conditions of service offered by Veta or the defendant. This certainly indicates that there could be no implied incorporation as far as the defendant or Veta were concerned. The offer once accepted by the individual officers would be a binding agreement in law as between Veta or the defendant and that officer. I am unable to see any basis for the plaintiff, as distinct from its individual members, being able to take advantage of this offer at all.

15. Could there be any implied incorporation by operation of law. I can find no assistance in the authorities referred to me as the cases are confined to their own facts. I am unable to find any basis to hold that there exist any particular circumstances to justify the intervention by operation of law to imply into the conditions of service of Veta or the defendant provisions in the Basings Agreement that had been deliberately left out by them, particularly in the absence of a legally enforceable agreement between the parties. Reliance was placed by Mr. Tang on the observation of Lawton L.J. in Gascol Conversions Ltd v. J W Mercer [1974] IRLR 155 at 157, that "In my opinion the making of national agreements between unions and employers' federations does not automatically change the terms of employment of any members of the union. Whether they do or do not must depend upon the circumstances of each case. For example, in the nationalised industries the making of a national agreement would produce, I should have thought, an almost irrebutable inference that the terms of employment had been changed, but it does not follow in other industries (particularly those in which there are large numbers of employers) that the making of a national agreement produces an inference having anything like the same effect." Mr. Tang submitted that the present case, involving only I employer and 1 union, is a stronger case for such an irrebutable inference to arise. In the first place, legal enforceability was not apparently in issue in that case. Secondly, even if the Basings Agreement is legally enforceable, should such an inference arise when 14% of the officers of the defendant are not members of the plaintiff, and that the contracting parties to the Basings Agreement did not include Veta? If such an inference should arise, should it only arise as between Veta/the defendant and members of the plaintiff or to all officers including those non-members of the defendant? If such inference could only apply to conditions of service affecting members of the defendant, does it mean that Veta/the defendant would have to have 2 different sets of conditions of service, applicable to members and non-members of the plaintiff respectively, for officers performing exacting the same job? I believe these problems would have first to be overcome before such an inference can arise as a matter of law. I am of the opinion that no such incorporation by operation of law can arise in the absence of a legally enforceable Basings Agreement; and even if the Basings Agreement is legally enforceable I have grave doubts whether any court can reasonably draw such inference in view of the obstacles outlined above.

16. The absence of an intent to create legal relations in the making of the Basings Agreement would effectively dispose of the plaintiff's claims. However, if I be wrong on the aforesaid issue, and for the guidance of the parties in the construction of the Basings Agreement as it is still binding in honour, I shall deal with the other issues raised by the plaintiff.

Unilateral termination by reasonable notice

17. Though Mr. Tang drew my attention to paragraphs 21 to 23 of the affidavit of Mr. Tucknott filed herein on 1 August 1994, where Mr. Tucknott queried the terminability of the Basings Agreement by reasonable notice when he referred to the absence of any provision for termination by notice in the agreement itself and the expected lifespan of the agreed arrangement, Mr. Tang has rightly not sought to persuade the court to hold that the agreement is not terminable by reasonable notice. I am satisfied that the nature of the agreement is such that it is terminable by reasonable notice as are the contracts of employment that agreement is dealing with. The real issue is what would be a reasonable period of notice to give for a unilateral termination of such an agreement.

The plaintiff submitted that in view of the long gestation period for the agreement and the drastic effect any change may have on both parties, 12 months would be a reasonable period of notice in the circumstances. Mr. Tang referred me to a previous agreement where the parties expressly provided for a 6 month notice for termination. Mr. Huggins drew my attention to the notice period for termination of the contracts of employment of the officers, which is only 3 months, and submitted that the same period for notice should apply for the Basings Agreement. Since any termination of the collective agreement would affect not only one or just a few of the officers who entered the new scheme, it would almost inevitable affect a very substantial number of them if not all; depending on what new scheme would be put in place of the existing one. It may also affect other officers who remained on the present conditions of service instead of opting for the basings scheme if the termination would mean a return of those officers who had opted to return to the present system. I accept that one is dealing with quite a different situation when changes on a grand scale, possibly an entire upheaval of the new scheme, a longer notice period than provided for the termination of an individual employment contract would be reasonable. I find notice of not less than 6 months to be reasonable in the circumstances of the case.

18. An issue that spins off from the above issue is the contention of the defendant that it is entitled to offer new conditions of service in defiance of the Basings Agreement during the 3 month notice period given by its letter dated 6 July 1994. I cannot accede to such an argument at all. Any attempt to defy the provisions of the Basings Agreement prior to the expiration of a notice of termination to bring its operation to an end must be a breach of the agreement. Such conduct obviously took place during the subsistence of the validity of the Basings Agreement.

Breach by the defendant

19. The plaintiff alleges against the defendant breaches of 3 specific provisions of the Basings Agreement. They are:

1. Clause 10(A), in that the defendant had failed to consult the plaintiff prior to a decision on the viability to extend basings arrangement to the classics fleet.

2. Clause 5(b), in that instead of providing medical coverage to the officers who had opted for basings, the conditions of service offered stipulated that such coverage would only be provided to officers at Base Administration Centres. For officers located outside the area not covered by the rules of the medical insurance schemes, a cash equivalent of the premium paid by the scheme would be provided.

3. Clause 1(a) and (b), in that the defendant had failed to consult the plaintiff prior to making changes to the conditions of service as provided for by clause 1(b).

Clause 10(A)

20. It is alleged by the plaintiff that the defendant was refusing to extend basings to the classics fleet under the pretext that the trial runs did not prove to be successful. The plaintiff alleges that in fact the trial runs were successful. It accused the defendant of deliberately and arbitrarily withholding the extension of basings to anxious officers with the intent of forcing them into accepting a review of the conditions of service intended by the defendant. This is denied by the defendant, saying that there were difficulties arising from rostering. It is the plaintiff's case that the defendant ought to have consulted the plaintiff over rostering in the trial runs pursuant to clause 10(A). The defendant contends that the duty to consult, if any, only arises after basings has been extended to the classics fleet and not at the trial run stage prior to any decision to extend basings. Clause 10(A) reads:

"Officers employed by either CPA or the new Company remaining in Hong Kong will be rostered network wide on a fair share basis with Officers in a Base Area, including reserves. For the avoidance of doubt, all flight patterns will be arranged in consultation with the HKAOA for the benefit of CPA and Officers as a whole whether based in Hong Kong or elsewhere and not to the benefit of any particular group of Officers. To this end, such patterns are flexible but any change shall only be made in accordance with the above principle."

21. Given its plain meaning, the clause can only operate in respect of and in the context of an existing basings arrangement. I cannot accept that the words on its face can be construed to cover trial runs prior to the establishment of the scheme in respect of the classics fleet. Could it be said then that it must be necessarily implied that such duty to consult should be extended to trial runs? It is trite law that the court will only imply into an express provision such further terms that are necessary to give effect to the true intention of the parties or for the carrying into effect of the intended purpose, or in order to give the provision such business efficacy that it requires. The clause did not expressly deal with any trial runs that the defendant or Veta may wish to carry out before deciding to extend basings to the classics fleet. It will come into operation once it has been decided that basings is to be extended to the classics fleet, and prior to a decision on the actual schedule for rostering for the officers. There is no justification nor reason to extend consultation to any trial run before it is decided that basings is to be extended to the classics fleet. The Basings Agreement only provided for the extension to the classic fleet "as soon as possible and where practicable". There is no provision to be found to the effect that the plaintiff is to be consulted on the decision as to whether it is practicable to extend basings to the classics fleet. In the premises, the failure to consult the defendant on the difficulties over rostering in the trial runs cannot be a breach of clause 10(A).

Clause 5 (b)

Clause 5(b) of the Basings Agreement provides that :

"An officer's spouse and eligible children will be provided with medical insurance cover equivalent to that which is received by a senior manager at the administration centre for the Base Area. Any additional medical insurance cover required will be for the Officer's own account."

22. However, the actual terms offered by the conditions of service of Veta provides that :

"A Pilots spouse and eligible children will be provided with medical insurance cover equivalent to that which is received by a senior manager at the Administration Centre for the Base Area. For the avoidance of doubt, medical insurance cover will only be provided at Base Administration Centres. For officers located in areas not covered by the rules of the medical insurance schemes, the cash equivalent of the premium paid by the Company for the schemes will be provided. Any additional medical insurance cover required will be for the Pilot's own account."

23. It is beyond peradventure that the actual condition offered is at variance with the much wider ambit provided in clause 5(b). The qualification disguised in the "for the avoidance of doubt" proviso is clearly designed to restrict the wide and general application of clause 5(b) only to officers located in areas covered by the medical insurance scheme of Veta. No such qualification can be found or implied into the plain wordings of clause 5(b). Insofar as the defendant failed to enter into an agreement with Veta to secure Veta's provision of medical insurance coverage in manner provided in clause 5(b), it is in breach of its contractual obligations under an agreement which I have already held to be binding in honour only. It would, however, be misleading to say that the defendant is in breach of clause 5(b).

Clause 1(a) and (b)

24. Clause 1(a) provides that Veta should only employ officers from the defendant on conditions of service that are the same as their existing terms with the defendant save as otherwise provided for in the Basings Agreement. Clause 1(b) provides that changes to the conditions of service will continue to be negotiated on the officers' behalf by the plaintiff in Hong Kong. The plaintiff made no complaint against the conditions of service offered to scale A officers. The complaint relates solely to conditions of service for the scale B officers, i.e. officers employed on or after 1 April 1993. The defendant's stance is that as the scale B officers were employed by Veta on the said conditions of service (the subject matter of complaint) upon transfer from the defendant to Veta, there has not been any change in the conditions of service to bring clause 1(b) into operation. The defendant submits that the only change in the Veta conditions of service that is different from the defendant's conditions of service prior to the transfer is to be found in clause 5(b), which has already been dealt with as a separate complaint of a breach. If the defendant concedes that the Veta conditions of service for scale B officers contained a departure from the defendant's conditions of service prior to the transfer, than there has been a change of condition of service to bring clause 1(b) into play. I am unable to find any restriction in the clause to limit the changes encompassed by the provision only to subsequent changes made by Veta to the initial conditions of service offered by it at the inception of the transfer. I am satisfied that a change of conditions of service from the defendant's existing conditions of service as at the time of signing of the Basings Agreement, though they come into existence as the first and original conditions of service offered by Veta, is covered by clause 1(b) when read in conjunction with subparagraph (a). The intention is clear that the existing conditions of service of the defendant as varied by the Basings Agreement as at the time of execution of the Basings Agreement are to form the basis for the operation of clause 1(b). In the premises, insofar as the defendant has failed to enter into an agreement with Veta providing that consultation should be had with the plaintiff prior to the introduction of conditions of service by Veta to the officers of the defendant that are different from the existing conditions of service under their employment with the defendant, it is in breach of its contractual obligation to do so, albeit the Basings Agreement is only binding in honour only.

Is the defendant precluded from offering basings to its officers other than in accordance with the Basings Agreement?

25. The first point to note is that basings is to be offered by Veta to the officers of the defendant who wish to go on a base. It is not in accordance with the facts to allege that anyone other than Veta would be offering basings to the defendant's officers. It can, at most, be asserted that the defendant should be compelled to cause Veta through its shareholdings in Veta (Veta being a wholly owned subsidiary of the defendant) to honour the conditions of service agreed in the Basings Agreement. Or, alternatively, to compel the defendant to enter into an agreement with Veta stipulating that Veta must offer employment to the defendant's officers who opted to go on a base on terms that mirrored the said agreed conditions of service. Whether the defendant could be compelled to do either of the above would depend on the legal enforceability of the Basings Agreement. In view of the conclusion on the issue of legal enforceability of the Basings Agreement reached earlier on, there is no question that the defendant could be compelled to do either.

Propriety of the relief

26. This issue does not fall to be considered in view of the conclusions reached as to the legal enforceability of the Basings Agreement. I do not propose to deal with it save to observe that I can readily see the force of some of the criticisms made by Mr. Huggins in this respect.

27. In the premises, for reasons given above, the plaintiff's claims are dismissed in their entirety. There is no reason known to me up to this stage to suggest costs should not follow the event, and accordingly there is an order nisi for costs to the defendant.