WONG YIN FONG AND OTHERS v. ISS HONG KONG SERVICES LTD

HCLA 56/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 56 OF 2003

(ON APPEAL FROM CLAIM NO. LBTC 963，964， 1072，AND 1100 OF 2004)

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J U D G M E N T

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1.  This appeal concerns the entitlements of the Claimants in respect of their contracts of employment with the Defendant. Their employments were terminated in 2001. The Claimants alleged constructive dismissal on the part of the Defendant. On the other hand, the Defendant alleged wrongful absence from work on the part of the Claimants which led to their summary dismissal. The dispute revolves around the legal effect of re-deployment of the Claimants by the Defendant as a result of its cleaning contract with the MTRC not being renewed as from 1 December 2001.  

2.  The background facts were succinctly set out by the Presiding Officer in Paras.1 to 7 of his Chinese written judgment of 30 January 2003. For the purpose of this judgment, subject to the supplement I make below as to the essential facts pertaining to the Claimants involved in the test appeal, I am content with adopting his summary in those paragraphs,

“	1.	本案被告人，服務系統有限公司（簡稱服務系統），是一間清潔服務承判公司，它與地下鐵路公司的清潔合約在2001年11月30日屆滿後不獲續期，因此而受影響的員工（此後只稱員工）有522名，其中158名員工在本案向它申索代通知金、有薪年假、遣散費及被克扣的年假工資。服務系統也向其中146名申索人反申索代通知金。
	2.	服務系統在2001年10月11日接到不續約通知後，決定將受影響的員工調派到其他的工作地點。它在11月初的7天內陸續發出調派通知書（第一次調派），但立刻受到員工強烈反對。服務系統在11月20日至24日將員工從新調派（第二次調派），但員工的反對情緒並沒有緩和。其後也有第三次調派，但此次調派只是對少數員工的個別要求作出安排，對本案所牽涉的問題影響不大。本席稍後只會對第一次和第二次調派作專題討論。
	3.	員工在接獲第一次調派通知書後，感到非常不滿，他們向香港物業管理及保安職工總會（簡稱工會）要求協助。工會的幹事立即派發傳單號召員工出席在11月5日舉行的工友大會。大會之後，工會在11月9日去信服務系統，指責他們“藉着無理調配，企圖逼工友辭職，以此省回遣散費”，並聲稱“工友已對公司失去信心”。同時工會代表員工向服務系統提出以下強烈要求：—
		“	(1)	公司對工友作出遣散費補償；
			(2)	在補償後，工友再自行決定是否跟公司的調配安排。”
	4.	當工會得不到滿意答覆後，員工在11月16日舉行第二次員工大會，對以後的工業行動作出決定。他們在11月18日集體往中環地鐵站向地下鐵路公司請願，亦由11月21日開始罷工，罷工持續到11月30日。
	5.	罷工開始的前一日，服務系統曾作出第二次調派，希望可以緩和員工的不滿情緒。但員工此時的態度已十分堅定，一方面拒絕接受任何調派，另一方面堅決要求遣散費。罷工期間，勞資雙方多次在勞工處安排的調解會議中舉行談判，但談判氣氛十分惡劣，結果不歡而散。11月29日，員工代表前往地下鐵路公司總部門外抗議。11月30日，員工代表又到政府總部門外舉行燭光集會。同日，各員工向服務系統發出“變相解僱”通知書，指出： —
		“	現在我們再向公司表明，由於公司的所作所為，我們視公司自12月1日已是變相解僱我們，我們將會循不同途徑追討我們的遣散補償。”
	6.	惠康清潔公司（簡稱惠康）是取代服務系統的地下鐵路公司的新承判商。本案的申索人也承認，他們之中有九成人以上，已在12月1日加入惠康，繼續在他們原來的工作地點工作。服務系統在11月27日發信呼籲員工“於12月1日前往新的工作單位報到”，並指出： —
		“	如員工不於指定時間向新工作單位報到而決定終止與公司的僱傭合約，該等員工並不可根據僱傭條例而視為遭僱主解僱，故此亦不會享有領取遣散費的權利。”
	7.	事實上，絕大部份員工都沒有在12月1日到新工作單位上班。服務系統在12月4日向他們發出“警告信”，在12月11日再發出“最後警告信”，兩封警告信清楚表明： —
		“	本公司會根據僱傭條例第九條終止與閣下的傭僱合約，生效日期為二零零一年十二月十五日，並保留追究閣下代通知金之權利。””

3.  There is a discrete claim by the Claimants in respect of attendance bonus which is also a subject matter of this appeal. I shall examine that after I dealt with the claims arising from termination of employment.

4.  The Presiding Officer dismissed the claims of the Claimants on 31 March 2003.

5.  There are altogether 98 Claimants who appealed against the decision of the Tribunal. Leave to appeal was granted on 19 December 2003. Due to the number of appellants involved and the fact that most of the Claimants who appealed did not have the benefit of legal representation, this court held several interlocutory hearings to deal with various procedural aspects of the appeal. The appeal was complicated by the fact that there were some documents which the Tribunal had withheld from inspection by the Claimants at the request of the Defendant. Leave was granted by this court on 6 May 2004 to solicitors for the represented claimants to inspect the documents and further leave was granted on 8 June 2004 to the solicitors to obtain copies of those documents. For the efficient and orderly conduct of the appeal, directions were given by this court for a test appeal to be heard first. The directions of 8 June 2004 are as follows,

“	1.	第24申索人、第38申索人和第131申索人之上訴案件作為本案中其他申索人之測試案件處理（“測試案件”）；
	2.	除第24、38及131申索人之測試案件外，本案其他申索人的上訴案件（“非測試案件”），其聆訊押後到測試案件之判決頒佈之後。測試案件之判案書會由法庭寄給非測試案件之申索人；
	3.	測試案件裁決的法律原則當應用於非測試案件的處理。如非測試案件之任何一方認為測試案件裁決的法律原則未能涵蓋個別非測試上訴的案情，各方可於前述測試案件判案書頒佈後的30天內，向法庭提出申請。若法庭於30天內沒有收到申請，法庭將按測試案件判定之原則，以書面形式處理非測試案件之上訴，不再另行通知及作其他之聆訊；”

6.  I should explain a little as to why the cases of Claimants 24, 38 and 131 were selected as the test appeal. Claimants 24 and 131 were employed by the Defendant as nightshift workers. They were represented by solicitors shortly after the application for leave to appeal was filed. The grounds of appeal drafted by the solicitor for these claimants were later adopted by the other Claimants who were nightshift workers as their grounds of appeal. The position of the day shift workers was slightly different. Some arguments advanced on behalf of the nightshift workers were not applicable to them. At first, none of the dayshift workers obtained any legal aid. This court allowed the union representative to address the court on their behalf at the interlocutory stage. After hearing the parties, this court considered that it is expedient to have a case of a day shift worker in the test appeal and it would also be better if that worker would also be legally represented. Hence, the case of Claimant 38 was added and legal aid was granted to her. She was represented by the same team of lawyers as the other claimants in the test appeal.

7.  It is convenient at this juncture to set out some additional facts concerning the claimants involved in this test appeal. Claimant 24 first joined the Defendant on 10 August 1997 and she worked at the Kwun Tong MTR Station as nightshift worker. She lived in Ngau Tau Kok. Her salary in November 2001 was $3,220 plus $300 attendance bonus. Her written contract contained the following provisions relevant to the issue of re-deployment,

“	1.3	工作分配:	僱員對本公司管理人所分配之工作，地點及時間必須遵守服從，不得爭論，違抗或怠慢。
	1.9	調 派:	如需要變更工作地點時，僱員應接受本公司合理之調派且不得向本公司索取任何賠償。”

8.  On 4 November 2001, she was notified that as from 1 December 2001, she would be re-deployed to Kowloon Tong Railway Station. The Defendant agreed to bear her additional transportation expenses. She responded by signing on a pro-forma letter addressed to the Defendant in the following terms,

“	致：	ISS服務系統（香港）有限公司
	我們是貴公司所承判的地下鐵路的清潔工友，我們日前收到公司的通知，得知 貴公司在地鐵的承判合約將於2001年11月約滿。
	按理公司應作出遣散補償。可是，公司卻企圖藉著將員工無理調配，逼使員工辭職，以此省回遣散費。
	現在，我們聯同工會致信公司，強烈要求：
	1.	對工友作出遣散補償。
	2.	在補償後，工友再自行決定是否跟從公司的調配安排。
	我們要求公司於2001年11月15日作出答覆，如公司漠視我們的要求，我們將發起進一步的行動。”

9.  By a letter dated 20 November 2001 (which was explained to her on 21 November 2001), the Defendant changed the re-deployment to the car-park at Taikoo Bazaar in Quarry Bay. The Defendant also agreed to bear the additional transportation expenses.

10.  Claimant 38 first joined the Defendant on 10 September 1998 as a day shift worker. She worked at the Shau Kei Wan MTR Station whilst she lived at Lok Wah Estate in Kwun Tong. Her salary in November 2001 was $3,800 plus $200 attendance bonus. Her written contract contained the following provisions relevant to the issue of re-deployment,

“	工作地點:	至誠轄下所屬之單位。”
“	本人明白即使已獲至誠環境服務有限公司錄用，公司亦可能向本人前任僱主進行諮詢，本人同意此項安排。另本人聲明上述所提供的個人資料，全屬正確無誤，倘若故意虛報資料或隱瞞重要事實，可被即時解僱。本人亦明白公司有權按實際情況調配工作，包括調派本人往其他單位或另一個職位。如不接納，公司可將本人視為自動離職，本人亦不得向公司索取任何賠償。”
“	工作分配:	僱員對本公司管理人所分配工作，地點及時間必須遵守服從，不得爭論，違抗或怠慢。”
“	調 派:	公司有權按實際情況調配工作，包括調派僱員往其他單位或另一個職位。如不接納，僱員可作自動離職論，不得向本公司索取任何賠償。”

11.  She was first given notice of re-deployment to Ocean Centre in Tsim Sha Tsui on 3 November 2001. The Defendant also agreed to pay her additional transportation expenses. She also signed the pro-forma letter. By a letter of 20 November 2001, the Defendant changed her re-deployment to Taikoo Bazaar at Quarry Bay, again with a promise to pay her additional transportation expenses.

12.  Claimant 131 first joined the Defendant on 5 May 1998 as a nightshift worker. She worked at the Lai King MTR Station whilst she also lived at Lai King. Her salary in November 2001 was $3,050 plus $300 attendance bonus. The terms in her written contract regarding re-deployment are as follows,

“	工作分配:	僱員對本公司管理人所分配之工作，地點及時間必須遵守服從，不得爭論，違抗或怠慢。”
“	調 派:	如本公司認為有需要時，僱員應接受本公司合理之調職，包括調往另一個工作地點或調派另一個職位。如不接納，僱員可作自動離職論，不得向本公司索取任何賠償。”

13.  She was first given notice of re-deployment to Exchange Square in Central on 1 November 2001. The Defendant agreed to pay her additional transportation expenses. She also signed the pro-forma letter. By a letter of 20 November 2001, the Defendant changed her re-deployment to Harbour City at Tsim Sha Tsui, again with a promise to pay her additional transportation expenses.

14.  The proceedings in the Tribunal were conducted and the judgment was written in Chinese. The Notice of Appeal was also in Chinese. However, the Defendant was represented by Mr Sarony SC at the appeal. Mr Chan SC also made his submissions in English. I therefore wrote this judgment in English. Since there are other Claimants who do not have the benefit of legal representation and their appeals are affected by the judgment in this test appeal, I directed a Chinese translation of this judgment be sent to them together with the English version at the same time as the handing down of this judgment.

15.  The Notice of Appeal is a lengthy document containing 38 grounds of appeal. Counsel have the good sense of reducing those grounds into several broad grounds and the main issues are as follows,

(a)	whether the Defendant was acting within its power under the mobility clauses in the contracts of employment in the re-deployment;
(b)	even if the Defendant did have the contractual power to re-deploy the Claimants, whether the exercise of such power in the circumstances of this case constituted breaches of any statutory duty under the Employment Ordinance or any implied duty owed by an employer to an employee, viz. whether there was any breach of implied duty to exercise such power rationally and in accordance with the duty of trust and confidence;
(c)	insofar as the repudiatory effect of the first re-deployment (viz. the first round of notices in early November) is different from the second re-deployment (viz. the notices of 20 November 2001), whether there was any acceptance of repudiation by the Claimants following the first round of notices which pre-empted the Defendant from remedying the situation by the second re-deployment;
(d)	in the cases of the nightshift workers, whether the Defendant’s re-deployment altered their working hours so that it constituted a fundamental change to their engagement and the Claimants were therefore entitled to regard the same as constructive dismissal in any event;
(e)	in respect of the findings by the Tribunal relevant to the above issues, whether such findings were tainted by any procedural irregularities. In particular whether the Presiding Officer was correct in withholding certain documents from inspection by the Claimants at the request of the Defendant;
(f)	the legality of non-payment of attendance bonus on account of the workers taking leave within the month in question.

The contractual mobility provisions

16.  I have set out the relevant contractual provisions in the written contracts of the three Claimants involved in this test appeal. Mr Chan did not dispute that the Defendant did have the power under those provisions to re-deploy the Claimants to other posts. What he disputed was whether the provisions were engaged on the facts of the present case. He laid emphasis on the expressions “需要” (need), “合理之調職” (reasonable re-deployment), “按實際情況調配” (re-deployment according to actual circumstances). He argued that when one considers “need”, it involved examination on two different levels: the need of the place where the worker were removed from and the need of the place where the worker would be sent to. He further submitted that the lack of genuine need for additional workers at the designated new workplace is also relevant to question of reasonableness.

17.  On the facts of the present case, Mr Chan contended that there were in fact insufficient jobs at the designated new workplace to absorb the transferred workers. Hence, the criteria of need, reasonableness and actual circumstances could not be satisfied and the contractual provisions were not engaged. He relied on the decision of Deputy Judge A. Cheung (as he then was) in Wong Yuk Ling v East East Food Products Ltd HCLA No.95 of 2002, 22 August 2003, to support his contention.

18.  In construing the terms of a contract, it is necessary to have regard to the underlying factual matrix (see Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896 at p.912F to 913E; Bank of China v Fung Chin Kan [2003] 1 HKLRD 181 at p.199F to G). With regard to these mobility clauses, the relevant factual background were set out in Paragraphs 16 and 17 of the judgment of the Presiding Officer,

“	16.	服務系統是一間總部設在丹麥的誇國公司，主要的業務是承判各個商業、工業及住宅單位的清潔服務。無可否認，它在香港的業務規模頗大，在2001年12日，它有承判合約2198個，其中大合約有226個，小合約有1972個，合約總值大約3100萬，因為清潔工作需要大量人手，所以合約的價值亦直接反映人手的需求。2001年11月的合約總值大約有3400萬，而僱用的清潔工人有5042名，工人的工資支出有1900萬。有部份清潔工作由分判商的工人擔任，在這方面的支出大約有650萬，所以11月的工人工資總支出大約是2550萬。
	17.	朱頌強先生是服務系統的工程部經理，主管清潔合約的執行和人手的調派，他為服務系統解釋這方面的運作和保留工人的政策。服務系統為客戶提供清潔服務的地點很廣泛，有工、商業大廈、公共機構大樓、交通機構客運大堂和月台、私人屋邨、商場、醫院等等，通常超過150處。因為每處、每班所需人手不同，所以人手調派是無可避免的。為提供最佳服務，不論合約有沒有指定工人數目，他們都因實際情況用足夠的工人來達到客戶的要求。通常的清潔服務，除了日常的例行清潔外，也要定時做一次全面的清潔，行內人叫“大做”。如每月一次的打蠟、去漬等，這些工作必須在夜間進行，又要在短時間內完成，所以需要的工人比較多，為確保穩定的效果，他都會調派由公司聘用而有經驗的工人來支援這項工作。服務系統是以投標方式獲得合約，因為合約是收入的來源，所以他們會不斷地參與投標爭取新合約，亦會努力為舊合約續期。但投標成功與否對業務管理方面是一個不明朗的因素，根據經驗，一旦成功獲得合約，通常在兩星期內便要開工，有時亦有數個合約一齊開工的情況。所以他們要保留一定數目的工人來應付新合約。失去合約會使人手過剩，獲得新合約會使人手緊絀，但這情況可透過適當調派來調節。”

19.  Mr Sarony rightly reminded this court that given the size of the Defendant’s operation, the nature of the cleaning industry, the high mobility of the cleaning workforce, the mobility clauses were clearly intended to provide the Defendant with a degree of flexibility in the deployment of its workers which was essential to the business operation of the Defendant.

20.  Against such background, I do not think Mr Chan’s construction of the mobility clauses is correct. I think the “need” under the contracts must be referring to the need of the Defendant. With the termination of the MTRC contract, it became necessary for the Defendant to re-deploy the workers. They could no longer work at the MTR stations. Those were the actual circumstances which triggered the mobility clauses. I do not think the need at the other work places is relevant as far as the engagement of the mobility clauses is concerned. Even if there were no immediate need to have these extra workers at the new designated work places, the Defendant still had a need to post them there due to the loss of the MTRC contract. Mr Chan suggested that the only option available to the Defendant was dismissal of the workers. I reject that submission. It would defeat the purpose of the mobility clauses. Mr Chan’s construction is simply unworkable. If he was correct, it would mean that the Defendant would have to have spare vacancies all the time in order to be able to rely on these mobility clauses to deal with the contingency of its cleaning contracts being terminated. In my judgment, the mobility clause should be construed on the basis that parties would wish to continue with the employment even though the cleaning contracts of one work place might be terminated during the course of an employment. Wong Yuk Ling v East East Food Products Ltd dealt with a case where need could not be established. It could not assist the Claimants in the present case.

21.  As regards reasonableness, the question is whether the re-deployment was reasonable. As a matter of construction, I do not accept that a re-deployment could not be reasonable unless there was a genuine need for extra manpower at the new designated work place. For the same reason given above, such a construction is absurd in the light of the underlying factual matrix and the purpose of such a clause. I shall say something more about the rationality of the re-deployment in the next section. Suffice to say at this stage, under the re-deployment notices, in addition to paying the Claimants the same salaries as before, the Defendant would pay the extra transportation costs incurred by them. There is certainly no suggestion (apart from the working hours of the nightshift workers which I shall deal with later) that the duties of the workers would be more onerous upon re-deployment. It is difficult to see why it is alleged that the re-deployment is unreasonable.

22.  Mr Chan contended that some of the workers would need to spend more traveling time. Given the transportation facilities available in Hong Kong, and having regard to the nature of the cleaning industry, comparing the relative distances between the original work place and the new work place designated under the two re-deployment notices in respect of each of the three Claimants in the test appeal, I do not consider the re-deployment to be unreasonable on that score.

23.  I therefore conclude that the Defendant was acting within the contractual provisions in making the first and second re-deployment.

Any breach of statutory or common law duties?

24.  In a way, the crux of the dispute between the parties is whether the Claimants had a right to demand the Defendant to dismiss them in November 2001 instead of re-deploying them to other posts in order to avoid its immediate obligation to pay severance payments. Put in another way, the question is whether it is legally permissible for an employer to continue with the employment of some unnecessary workers by paying the same level of salaries even though some of them would be idle instead of dismissing them and making severance payments right away. An important element in the Claimants’ argument of bad faith on the part of the Defendant is built upon the premise that the only legal option available to the Defendant in the circumstances was to dismiss them and pay them severance payment in November 2001.

25.  It may sound odd for a worker to claim that he has a right to be dismissed. Normally, it would not do a worker any harm if the employer continues to pay his wage even if there are insufficient works so long as his pay does not depend on the works he did. He could wait until such point in time when the employer could not afford such a course. When the employer eventually terminates his employment, the worker could still get his severance payment. However, as the present case demonstrates, there could be situations where a worker may not wish to wait. As mentioned by the Presiding Officer in Paragraph 6 of his judgment, the new MTRC contractor offered to employ these workers and most of the Claimants took up the offer. In order to do so, the workers had to terminate his employment with the Defendant, either by resignation or by dismissal. But if a worker resigned, he could not get severance payment. That was why these Claimants had to advance a case of constructive dismissal and advocate a right to be dismissed in support of that contention.

26.  To resolve this fundamental issue, it is necessary to consider the legislative scheme in the Employment Ordinance. Part VA of the Ordinance provides for severance payments. Apart from the case of lay-off stipulated under Section 31E, an employee is only entitled to severance payment if he is dismissed by reason of redundancy (Section 31B(1)(a)). An employee who was summarily dismissed would not be entitled to severance payment, Sections 31C(1) and 31D(1)(a). The present case is not a case of lay-off since the remuneration of the Claimants did not depend on their being provided with work. Hence, there must be a dismissal by the employer before severance payments could arguably be payable.

27.  When an employer chooses to continue with the employment and pay his employee the same wage as before, there are clear indications from other provisions in the Ordinance that this should not trigger any obligation to pay severance payment and there was no statutory obligation on the part of an employer to dismiss an excessive workforce,

(a)	even in a case where the remuneration of a worker depends on work being provided, an employer can avoid liability to pay severance payment if he paid to the employee a sum equivalent to the wages which the employee would have earned if work had been provided on the days on which no work was provided, see Section 31E(1);
(b)	it is a defence to a claim for severance payment if an employer offered, at least 7 days before the date of termination, to re-engage the employee even if the re-engagement were on different terms so long as the offer is, inter alias, no less favourable to the employee than hitherto, see Section 31C(3).

28.  Hence, it is wrong to suggest that a situation of redundancy triggers a right to severance payment on the part of the employee. Unless and until the employer dismisses an employee, there is no right to severance payment.

29.  The only instance where the Ordinance provides for lump sum payment upon termination by an employee is long service payments under Part VB. That only applies to employee who has 5 years’ service and terminates his employment on medical grounds or those who reaches 65 years of age, Section 31R(1)(a)(ii) and Section 10(aa) and Section 31R(1)(b). Under the existing legislation, there is no general statutory entitlement to lump sum payment in other cases if an employee terminates his employment. None of the three Claimants in the test appeal reached the age of 65 in 2001.

30.  It is important to bear these statutory provisions in mind in identifying the intent of the legislature. If the existing legislation on severance payments permits an employer with excessive number of workers to keep an employee by paying him the same wages as he would have earned if sufficient works were provided, the court should be slow to conclude that such course is not permitted by developments under the common law in terms of the duty of trust and confidence (see Johnson v Unisys Ltd [2003] 1 AC 518).

31.  Whilst it is correct that the legislation also provides for constructive dismissal as a triggering event for entitlement to severance payment (on the footing that it constitutes dismissal by the employer), it begs the question what constitutes constructive dismissal. I propose to deal with this question from three different angles.

32.  First, the starting point is the principle laid down in Western Excavating (ECC) Ltd v Sharp [1978] ICR 221. The correct approach is to apply the same principle as in the case of repudiation of other contracts. Judging from the changes brought about by the re-deployment, the terms accompanied the re-deployment and the relevant contractual provisions in the contracts of employment, it should be apparent from what I said above that objectively speaking, putting aside the point about the working hours of the nightshift workers for the time being, it is difficult to suggest that there was such a substantial change in the job nature (by that I include the place of work and the terms of employment) that the re-deployment constituted a repudiatory breach by the Defendant.

33.  The Claimants however argued that the motive of the Defendant is relevant. It is said that because the Defendant made the re-deployment with a view to avoid its obligation to make severance payments, this constituted a repudiation. Mr Chan submitted it is the Claimant’s case that the Defendant was betting on the Claimants’ taking up the new offer from the new contractor.

34.  That involves consideration of duties implied by the common law in an employment relationship. Mr Chan submitted that the Defendant was acting irrationally and in breach of the duty of trust and confidence in re-deployment the Claimants instead of making severance payments.

35.  This brings me to consider the second common law dimension, the duty to act rationally in the exercise of a discretion by an employer. It has been held that such implied duty exists in situations where an employer has a discretion in deciding the level of certain benefits payable to his employee, see Clark v Normura International plc [2000] IRLR 766; Wood v Jardine Fleming Holdings Ltd [2001] 2 HKC 735; Wong Huey Lan v Colgate-Palmolive HCLA 77 of 2001, 11 March 2002; Wong Shun v General Security (HK) Ltd HCME 4 of 2002, 11 April 2003; Mallone v BPB Industries Ltd [2002] ICR 1045; Kwan Ka Man Blanche v Esprit Retail (Hong Kong) Ltd HCLA 160 of 2003, 15 July 2004. On the other hand, I expressed doubts in Wong Ho Ching v Direction of Food and Environmental Hygiene HCMP 3835 of 2002, 3 June 2003on the application of such implied duty in the context of promotion (as well as the implied duty of trust and confidence).

36.  In the present appeal, arguments before this court focused on the rationality of the re-deployment and I do not think the question whether such implied duty exists at all has been sufficiently debated. Mr Sarony relied onWestern Excavating (ECC) Ltd v Sharp [1978] ICR 221 and Rank Xerox Ltd v Churchill [1988] IRLR 280 to contend that there was no general duty to act reasonably in the context of a contract with express mobility clause. But a duty to act rationally is not a duty to act reasonably. The distinction is highlighted by Burton J in Clark v Normura International plc [2000] IRLR 766, cited by Rix LJ with approval in Mallone v BPB Industries Ltd [2002] ICR 1045,

“I do not consider it is right that there be simply a contractual obligation on an employer to act reasonably in the exercise of his discretion, which would suggest that the court can simply substitute its own view for that of the employer. My conclusion is that the right test is one of irrationality or perversity (of which caprice or capriciousness would be a good example) i.e. that no reasonable employer would have exercised his discretion in this way. … In reaching its conclusion, what the court does is thus not to substitute its own view, but to ask the question whether any reasonable employer could have come to such a conclusion.”

37.  I am prepared to hold that an implied duty to act rationally exists with regard to the exercise of a power of re-deployment by an employer. By that I mean an employer must act rationally in deciding how an employee is to be re-deployed. For example, it is irrational if a re-deployment is carried out in a manner that frustrate an employee’s attempt to perform the contract, as in the case of United Bank Ltd v Akhtar [1989] IRLR 507.

38.  On the other hand, I do not think such implied duty dictates that in choosing between dismissing an excessive workforce and re-deploying them to other posts where the job requirements may not justify their attendance, the employer must choose the former. In my view, given the legislative limits on severance payments and long service payments, it is well within an employer’s rational exercise of his power of re-deployment in a manner that could lawfully avoid severance payments for the time being.

39.  In fact, it would be quite unacceptable if the law were otherwise. That would imply that an employer who has excessive labour for the time being due to the loss of certain contracts is legally obliged to dismiss the excessive number of workers right away. That is so notwithstanding that the employer might be able to absorb those workers in the long run by getting new contracts. A large number of workers would lose their jobs unnecessarily if such a duty were imposed by the law. This cannot be right.

40.  In the present case, there is evidence before the Tribunal that the Defendant had adopted measures aiming at absorbing all the workers in a couple of months’ time. This is set out in Paragraph 18 of the judgment of the Presiding Officer. In my view, the chart at B413 does not invalidate the conclusion of the Presiding Officer at Paragraph 23,

“

23.

服務系統、申索人及工會幹事在服務系統是否有足夠的空缺來安置354名員工的問題上都花了很大的人力物力。申索人全部都是普通清潔工人，以服務系統的規模，本席相信它最終可以找到足夠的職位的。就算服務系統一時間找不到足夠的職位，如它願意暫時白支工資給申索人，是否有足夠空缺的問題是不重要的。但申索人以預期沒有足夠空缺或預期會被重覆調派為藉口而拒絕任何調派是不合理的。”

41.  Subject to the implications arising from the documents withheld from inspection, I am not persuaded that this court is entitled to disturb the findings by the Presiding Officer.

42.  Against such background and in view of my analysis as to the duty to act rationally, I do not think the Defendant acted in breach of that duty whether in terms of the first re-deployment or the second one.

43.  The third common law dimension is the implied duty of mutual trust and confidence. In Woods v W M Car Services (Peterborough) Ltd [1981] IRLR 347, Browne-Wilkinson J (as he then was) held,

“In our view it is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.”

44.  The implied duty was endorsed by the House of Lords in Malik v Bank of Credit and Commerce International SA [1998] AC 20.  Whether there has been a breach of the implied duty of trust and confidence is to be judged objectively. Lord Nicholls regarded that the conduct relied on as constituting the breach must “impinge on the relationship in the sense that, looked at objectively, it is likely to destroy or seriously damage the degree of trust and confidence the employee is reasonably entitled to have in his employer” (p.35C).

45.  In Johnson v Unisys Ltd [2003] 1 AC 518 at para.37, Lord Hoffmann identified two difficulties in extending such implied duty to dismissal,

“The first is that any terms which the courts imply into a contract must be consistent with the express terms. Implied terms may supplement the express terms of the contract but cannot contradict them. Only parliament may actually override what the parties have agreed. The second reason is that judges, in developing the law, must have regard to the policies expressed by Parliament in legislation. Employment law requires a balancing of the interests of employers and employees, with proper regard not only to the individual dignity and worth of the employees but also to the general economic interest. Subject to observance of fundamental human rights, the point at which this balance should be struck is a matter for democratic decision. The development of the common law by judges plays a subsidiary role. Their traditional function is to adapt and modernize the common law. But such developments must be consistent with legislative policy as expressed in statutes. The courts may proceed in harmony with Parliament but there should be no discord.”

See also the observations of Lord Millett at Para.80.

46.  Subsequent developments as illustrated by Eastwood v Magnox Electric plc [2004] 3 WLR 322 shows that there could be practical problems in applying the demarcation of the ‘Johnson exclusion area’. Lord Steyn suggested in Eastwood that Johnson might be opened to review in a future case. However, the other Law Lords in Eastwood did not embrace such suggestion. Lord Nicholls (with whom the other three judges concurred) considered that the solution lies with legislative intervention. His Lordship reiterated the rationale of Johnson in his judgment in Eastwood,

“	13	In fixing these limits on the amount of compensatory awards Parliament has expressed its view on how the interests of employers and employees, and the social and economic interests of the country as a whole, are best balanced in cases of unfair dismissal.  It is not for the courts to extend further a common law implied term when this would depart significantly from the balance set by the legislature.  To treat the statutory code as prescribing a floor and not a ceiling would do just that.  A common law action for breach of an implied term not to be dismissed unfairly would be inconsistent with the purpose Parliament sought to achieve by imposing limits on the amount of compensatory awards payable in respect of unfair dismissal.  It would also be inconsistent with the statutory exclusion of the statutory right where an employee had not been employed for a qualifying period or had reached normal retiring age or the age of 65 and, further, with the parliamentary intention that questions of unfair dismissal should be dealt with by specialised tribunals and not the ordinary courts of law.
	14	I recognise that, by establishing a statutory code for unfair dismissal, Parliament did not evince an intention to circumscribe an employee's rights in respect of wrongful dismissal.  But Parliament has occupied the field relating to unfair dismissal.  It is not for the courts now to expand a common law principle into the same field and produce an inconsistent outcome.  To do so would, incidentally, have the ironic consequence that an implied term fashioned by the courts to enable employees to obtain redress under the statutory code would end up supplanting part of that code.”

47.  These limitations are important in the present context even though we are not dealing with the exercise of the power of dismissal by the Defendant. First, there were express provisions in the employment contracts for re-deployment. Hence, it is not possible to imply a duty stemming from the duty of trust and confidence that the Defendant could not re-deploy when, as I held above, the mobility clauses were applicable.

48.  Second, given the legislative policy on severance payments as explained above, it is impossible to hold that there is an implied duty under the common law developed from the duty of trust and confidence to the effect that an employer is obliged to trigger his liability to pay severance payment whenever he has excessive workforce. That would be directly contradictory to the statutory provision in Section 31E. 

49.  Further, I have conceptual difficulty with the proposition that the refusal of the Defendant to dismiss the Claimants constituted a breach of the implied duty of trust and confidence. As pointed out by Lord Nicholls in Malik at p.36E, the purpose of the implied duty is to facilitate the proper functioning of the contract. In other words, the whole point of having such an implied duty is to provide the underlying basis for the continuation of the employment relationship. It is an antithesis of that purpose if such implied duty requires the employer to terminate that relationship.

50.  As regards the alleged motive on the part of the Defendant to minimize its liability to pay severance payments by counting on the Claimants’ acceptance of the offer of the new contractor, I do not think it provides a sound basis to advance a case of constructive dismissal in the present circumstances. It cannot be disputed that the re-deployments were triggered by the termination of the MTRC contract. As explained above, there is no rule of law whether under the statute or common law which obliges the Defendant to dismiss the Claimants as opposed to re-deploying them to other posts. Even if the Defendant did take into account the possibility of some workers resigning in order to take up the offer of the new contractor, that was quite legitimate because the law permits an employer to adopt a “wait and see” approach in dealing with a situation of excessive workforce so long as the Defendant continued to pay the workers the same wages and the re-deployments were rational.

51.  On true analysis, the Defendant did not deprive the Claimants of any right to severance payments. As at the dates of first re-deployment, the Claimants did not have any accrued right to severance payments. The Defendant did not terminate their employments. If the Claimants continued to work for the Defendant, they could still get severance payments if the Defendant has to dismiss them eventually. The reason why the Claimants could not get severance payments was their own choice in taking up the new jobs offered by the new contractor as opposed to the re-deployments. The exercise of such choice by the Claimants was wholly outside the control of the Defendant.

52.  I do not see any material distinction between the present situation and the following example. Assuming we have an employer who have a number of shops throughout Hong Kong. If one of his employees gets an offer from someone else for a job nearer to his home, can he claim severance payment on the basis of constructive dismissal if the employer turns down his demand to re-deploy him to a shop nearer to his home because the employer knows he would probably switch to the new job if the request is turned down? I would have no difficulty in rejecting such claim.

53.  Mr Chan contended that in the present case, it was the Defendant who took the initiative in making the re-deployments. I do not think that is material. For reasons already given, it was within the right of the Defendant to re-deploy the Claimants upon the termination of the MTRC contract. As far as the termination of the employment is concerned, it was due to the initiative on the part of the Claimants in deciding to take up the jobs offered by the new contractor. Once this is appreciated, it could be readily seen that the argument of constructive dismissal based on the Defendant’s refusal to dismiss the Claimants cannot be sustained.

54.  I therefore conclude that the Defendant was not acting in breach of any statutory or common law duty in choosing to re-deploy the Claimants instead of dismissing them. 

55.  The first re-deployments were acknowledged by the Defendant to be unsatisfactory. That was why the Defendant made revised re-deployments on 20 November 2001. The Claimants contended that the first re-deployments were a deliberate attempt by the Defendant to force the Claimants to resign. The Presiding Officer referred to their evidence and the explanation by the representative of the Defendant in Paragraph 19 of his judgment. He exonerated the Defendant from the charge of acting with improper motive, see Paragraph 26. Subject to the discussion on documents withheld from inspection, I see no basis for this court to go behind such finding of fact.

56.  However, I do not rule out the applicability of the implied duty of trust and confidence generally in respect of transfer of workers to different work places. I only decide that in the context of the present case, where an employer has lost the contract for a particular work place, a worker could not suggest that there is a breach of that duty because his employer chooses to re-deploy him instead of dismissing him even though the employer is aware that the worker would probably resign in the light of re-deployment.

57.  Given the above conclusions, there is no need to consider issue (c) mentioned in Paragraph 15. The notice dated 3 November 2001 (Bundle B-1 p.84) made it plain that any workers having difficulties arising from the first re-deployment could discuss the matter further with the Defendant. In view of that, I do not think it was open to the Claimants to contend that it was too late for the Defendant to revise the re-deployments after the Claimants were unsatisfied with the first re-deployments. As pointed out by Mr Sarony, the implied duty of trust and confidence is a mutual one. If a worker had personal difficulties with the first re-deployment, he should have raised such difficulties with the Defendant as suggested by the notice of 3 November 2001 instead of insisting on dismissal.

The working hours of the nightshift workers under their contracts of employment

58.  The Claimants challenged the Presiding Officer’s finding as to the terms of employment regarding the working hours of the nightshift workers. The Claimants contended that the Presiding Officers committed errors of law in finding that the contractual working hours were from 11:00 pm to 7:00 am. Due to what the foremen told the workers when they were recruited about the long standing practice that the nightshift workers were allowed to leave at around 3:30 am upon all the works completed (with one worker staying behind), Mr Chan contended that the working hours of these workers under their employment contracts should be regarded as those implemented in practice as opposed to what was written on their contracts. Hence, it was contended that by re-deploying the workers to other posts which required them to work up to 7:00 am, the Defendant imposed additional working hours on the workers and committed a repudiatory breach of the contracts of employment.

59.  A number of legal arguments were put forward by Mr Chan to support this contention,

(a) incorporation of the representation by the foreman in recruiting the workers as term of the contract;

(b) collateral agreement;

(c) composite agreement.

60.  The written contracts signed by the nightshift workers contained express provision stipulating that the working hours were between 23:00 and 07:00. The evidence of the workers who testified before the Presiding Officer confirmed that the foremen had pointed out to the workers that such provision existed in the contracts when they were recruited, see Paragraph 29 of the judgment. However, the foremen also told them that normally they could be off duty around 3:30 am.

61.  The findings of the Presiding Officer as to the effect of such statement by the foremen can be found in paragraphs 31 and 32 of his judgment,

“	31.	服務系統與地下鐵路公司的清潔合約就夜班而言是8小時服務的，所以服務系統對工人提早下班的安排無權批准，亦不能將此安排轉化為自身的商業利益。它與夜班工人所定立的僱傭合約也很清楚是8小時工作，聘請只工作3至4小時的工人是不能履行地下鐵路公司的合約的，亦沒有證據證明服務系統有此毀約行為。工人入職的時候所簽署的亦是8小時工作的僱傭合約，工作地點是隨着清潔合約而改變。就整體情況而言，本席認為新入職的工人所得到的信息是“慣常情況下可以在3時半下班”，而不是“僱傭條件是在3時半下班”，前者是事實的陳述，後者是合約的闡釋。
	32.	地下鐵路公司給與夜班工人特別的待遇是可以理解的。除了得到新科技的幫助外，工人因為沒有乘客在月台上可以在毫無限制的環境中工作，亦不須要循環地進行清潔，所以凌晨3時半前就可以完成所有的清潔工作。地鐵站長亦不願意在地鐵站內看管着一群在月台上流連而無所事事的清潔工人，讓他們提早下班是兩全其美的安排。但地下鐵路公司並沒有完全放棄工人要提供8小時的清潔服務的合約權利，所以他們需要1個工人留站候命，而由其他工人合資給與這工人一些津貼。這個安排說明工人的責任仍然是8小時，假如有突發事件需要工人在凌晨3時後進行清潔，本席認為根據僱傭合約工人不能拒絕工作，亦不能索取超時工資的。”

62.  In essence, the Presiding Officer found that the representations made at the time of recruitment did not have the effect of overriding the working hours stipulated in the written contracts of employment. The legal effect of certain representations made at the time of contract is a question of mixed law and fact. The factual elements involved findings as to what was actually said, what were the underlying factual matrix, what were the common understanding between the parties. The court then consider whether the various possible legal analysis set out in Paragraph 59 above can be applied to these findings of fact.

63.  What were actually said to the employees during recruitment are basically findings of fact. In general, this court cannot disturb such findings in hearing an appeal from the Tribunal. Mr Chan submitted that the Presiding Officer made errors of law in the process of coming to such findings. The first alleged mistake was that the Presiding Officer took into account of the terms of the contract between the Defendant and MTRC in arriving at such finding. Mr Chan argued that this is legally not permissible because the Claimants were not parties to that contract. I do not agree. Whilst it is trite law that the Claimants cannot be bound by the terms in the contract between the Defendant and MTRC as they were not privy to that contract, it is equally plain that the contract with MTRC was part of the underlying factual matrix to the employment contracts between the Claimants and the Defendant. It is therefore eminently sensible for the Presiding Officer to have regard to the relevant provisions in the MTRC contract as part of the factual matrix in assessing the inherent probability as to what precisely had been represented to the Claimants. I do not think the Presiding Officer made the mistake of holding the Claimants to be bound by the terms of the MTRC contract.

64.  More importantly, as noted by the Presiding Officer in paragraph 32 of his judgment, the workers had to arrange for one worker to remain at the MTR station until 7:00 am and the other workers had to pay him for that. In my judgment, this is the clearest indication that the workers understood that their contractual working hours had not been altered. Otherwise, there was no reason why they would need to pay for such arrangement. Further, as observed by the Presiding Officer, the arrangement also evidenced that if there were unexpected incident necessitated works to be done after 3:30 am, the workers could not complain.

65.  The matter can be tested by postulating what would happen if none of the workers agreed to stay behind after 3:30 am or if they could not agree on the payment arrangement for the standby worker. Plainly, in that case, all the workers would have to stay at the station until 7:00 am.

66.  Against such background, even though the workers were told about this special arrangement when they were recruited, it is quite clear that neither party regarded this arrangement as contractual in nature. The findings by the Presiding Officer on the point cannot be faulted. In fact, any other finding would be perverse.

67.  In my judgment, the most that one can say about the special arrangement was a special indulgence or forbearance on the part of the Defendant: so long as the Claimants were working at the MTR stations and they could complete the works accordingly with satisfactory arrangement for a standby worker in place, the Defendant could not complain about the workers went off duty from these posts around 3:30 am. However, it would be going beyond the legitimate limit of the special arrangement to suggest that the Claimants could not be transferred to another post which required him or her to work beyond 3:30 am. The contractual working hours remained from 11:00 pm to 7:00 am.

68.  Hence, I do not think the Claimants can succeed on this point. The nightshift workers are therefore in the same position as the dayshift workers on the question of constructive dismissal.

Withholding of documents from inspection by the Claimants

69.  At the request of the Defendant, the Presiding Officer withheld certain documents from inspection by the Claimants on the ground that such documents contained sensitive information. He did not, as Mr Sarony submitted, exclude the admission of such documents as evidence or treated them as irrelevant. As mentioned, I released the documents for inspection by those acting for the Claimants in the test appeal. As a result, Mr Chan had identified some documents which he submitted are relevant on some findings made by the Presiding Officer. He contended there had been material procedural irregularity in the trial and the Claimants were prejudiced.

70.  In Dynamic Way International Ltd v Ho Kui Chee [2000] 4 HKC 138, Rogers JA (as he then was) held that except in very unusual circumstances, a party should not be faced with having to deal with evidence which it is not permitted to see. It is also worth reciting what was said by Sir John Donaldson MR in WEA Records Ltd v Visions Channel 4 Ltd [1984] FSR 404 at p.406,

“…I cannot at the moment visualize any circumstances in which it would be right to give a judge information on an ex parte application which cannot at a later stage be revealed to the party affected by the result of the application. Of course there may be occasions when it is necessary, for example, to conceal the identity of informant, but the judge will then have to make up his mind to what extent he is prepared to rely upon information coming from anonymous and unidentifiable sources.”

71.  In the present case, the Defendant argued that the documents contained sensitive information, in particular certain figures set out in a tender document which should not be disclosed to the Claimants who are now working for its competitors. A similar plea was rejected by Jones J in Interlego AG v Tyco Industries Inc [1985] HKLR 115. I have examined the documents and I do not think there was sufficient ground to justify withholding them from inspection by the Claimants. It is rather unreal to suggest that the workers would pass on such information to the new contractor. In fact, by the time of trial, the Defendant had already lost the MTRC contract. I do not believe the data which the Defendant sought to withhold from the Claimants (viz. figures set out in various options put by the Defendant to the MTRC and the information relating to its sub-contractors) still retained any commercial significance. In any event, even if they were sensitive information which the Defendant would prefer not to disclose, that is not a sufficient reason to justify the course taken by the Presiding Officer.

72.  Mr Sarony submitted that the Presiding Officer had to exercise his discretion by taking into account that there was no legal representation at the Tribunal. I do not regard that as a ground for departure from the principle set out in the cases I mentioned. Insofar as there is a concern that the Claimants might misuse the information, the remedy lies in clear direction given to the Claimants that the information should only be used for the purpose of the present litigation and using the same for other purposes without leave of the Tribunal is prohibited. I regard the right to inspect documents furnished to the court by one’s opponent as an important underpinning for procedural fairness which is as essential for administration of justice in the Tribunal as in other courts. As I have said in Le Thi Bich Thuy Kitty v Sheraton International HCLA 34 of 2004, 4 June 2004, Paras.10 and 11, there is a distinction between the inquisitorial role of a Presiding Officer and the role of an advocate for a party. It is important that a party should be given a fair opportunity to cross-examine the witnesses that he wishes to challenge. Likewise, he should be given a fair opportunity to consider the documents furnished to the Tribunal by his opponent (see also陳銀冰 及 馮若虹 HCSA 48 of 2003, 3 June 2004).

73.  I therefore hold that there was a procedural irregularity in the proceedings in the Tribunal. The Claimants should have been allowed to inspect the documents.

74.  But it does not follow that this court must remit the case to the Tribunal for re-trial after due consideration of the documents by the Claimant. It depends on whether is any substantial miscarriage of justice (see Order 55 Rule 7(7) RHC). The test was formulated by Sir John Donaldson MR in Dobie v Burns International Security Services [1985] 1 WLR 43,

“Once you detect that there has been a misdirection, and particularly that there has been an express misdirection of law, the next question to be asked is not whether the conclusion of the Tribunal is plainly wrong, but whether it is plainly and unarguably right notwithstanding that misdirection. It is only if it is plainly and unarguably right notwithstanding the misdirection that the decision can stand. If the conclusion was wrong or might have been wrong, then it is for an appellate Tribunal to remit the case to the only Tribunal which is charged with making findings of fact. [The appellant] did not have to go to the length of saying that the Tribunal’s findings were perverse, and the majority [of the EAT] were wrong in thinking that they were prevented from sending the matter back on the basis that another Tribunal, to wit themselves, would have reached a different conclusion. All three of them were obliged, in my judgment, to remit the matter to the Tribunal notwithstanding that this is a very stale case …”

That approach was applied in the context of wrongful exclusion of documents in Harakis v Department of Health EAT/1339/98, 6 April 2000.

75.  Mr Chan contended that the documents withheld could assist the Claimants in the following aspects of the case,

(a)	To establish that the salaries of the nightshift workers were lower than the minimum wages the Defendant promised the MTRC in the tender documents;
(b)	To establish the lack of genuine need for so many workers at the designated new posts.

To illustrate these points, he took the court to the documents in Bundle D.

76.  The fact that the nightshift workers had been paid at levels below the minimum wages set out in the tender documents does not take the workers’ case of constructive dismissal further. Mr Chan attempted to rely on this to show that the contractual working hours were shorter than that stipulated in the employment contracts. I fail to see how it could override the contractual stipulation. Given the workers’ funding for the special arrangement, even if the deviations from minimum wage levels were taken into account, the Presiding Officer’s conclusion on the effect of the statements by foremen is plainly right. Any other conclusion would be perverse.

77.  As explained above, given the termination of the MTRC contract, the inevitable time taken for absorbing the Claimants and the willingness of the Defendant to pay the same salaries in the meantime, whether there were immediate genuine operational need to have so many workers at the designated new posts was not important.

78.  Mr Chan submitted that these documents might also affect the Presiding Officer’s assessment of the credibility of the Defendant’s representatives. Even in the context of implied duty of rationality and mutual trust and confidence, the issues have to be considered objectively. Broadly speaking, the indisputable facts were: (a) the Defendant lost the MTRC contract which necessitated re-deployment; (b) the employment contracts contained express power of re-deployment; (c) the Claimants were re-deployed to new posts which were within reasonable distance although it would necessitate more traveling time; (d) the Defendant offered to pay the additional traveling expenses incurred by the Claimants; (e) upon complaints by the Claimants, the Defendant interviewed each affected workers to consider his or her individual circumstances and revised the re-deployment to minimize the inconvenience caused to the Claimants; (f) the Claimants would be paid at the same level of salaries upon re-deployed; (g) the Defendant had taken measures aiming at absorbing all the Claimants in other posts within a couple of months’ time. Having regard to all these, I do not think the Claimants could establish any breach of duties on the part of the Defendant to sustain a case of constructive dismissal even if they could cross-examine the Defendant’s representatives with the benefit of the withheld documents.

79.  Hence, even though I am of the view that the Presiding Officer erred in law in withholding the inspection of the documents, I do not think this error result in any substantial miscarriage of justice and the Claimants cannot succeed in the appeal on this ground.

80.  The Claimants’ appeal in respect of constructive dismissal therefore fails.

Attendance bonus

81.  The written employment contracts did not provide for attendance bonus. It is common ground that the Defendant had been paying attendance bonus since 1979 and the practice had always been that such bonus would be paid each month if the worker had not been absent from work, including absent on account of taking annual leave. The Claimants contended that the Defendant should not withhold attendance bonus on account of a worker taking annual leave.

82.  The Presiding Officer held in Paragraph 39 of his judgment that as attendance bonus was not one of the benefit specified by the Employment Ordinance, it was up to an employer to decide whether it should be paid and the terms under which it would be paid.

83.  Although the law does not stipulate that an employer must pay attendance bonus to his employee, it does not mean that attendance bonus could not be part of the wages. Under Section 2(1) of the Employment Ordinance, the definition of “wages” includes attendance bonus but excludes attendance bonus which is of a gratuitous nature or which is payable only at the discretion of the employer.

84.  There have been cases where attendance bonus was held to be part of the wages, see Wong Ping Kong v Tai Hing Cotton Mill [1994] 2 HKLR 107; New Bright Industrial Co Ltd v Wong Sau Chi [1995] 2 HKC 357; Chow Wai Yee v Fong’s National Engineering Co Ltd [1996] 1 HKC 649; Wong Shun v General Security (HK) Ltd HCME 4 of 2002, 11 April 2003. The question is whether the attendance bonus was given in respect of work done under the contract of employment and not of a gratuitous nature or payable only at the discretion of the employer.

85.  In the present case, the effect of the evidence is that since 1979 the attendance bonus was regarded by both the employer and the employees as payable if the latter did not absent from work. Plainly the attendance bonus is not of a gratuitous nature nor payable only at the discretion of the employer. I do not see any valid distinction between the present case and Wong Ping Kong v Tai Hing Cotton Mill [1994] 2 HKLR 107; New Bright Industrial Co Ltd v Wong Sau Chi [1995] 2 HKC 357; Chow Wai Yee v Fong’s National Engineering Co Ltd [1996] 1 HKC 649. I do not accept Mr Sarony’s submission to the contrary. The attendance bonus in New Bright and Chow Wai Yee were fixed sums instead of a percentage of the basic wage as in the case of Wong Ping Kong. Keith J expressly stated in the latter case at p.109 that how the attendance was calculated was not a relevant consideration.

86.  I see no basis for importing a test of proportionality in determining whether the attendance bonus come within the definition of wages under Section 2(1). The essential element, as pinpointed by Keith J in Wong Ping Kong, is that the attendance bonus represented a component in a worker’s pay for the work he had done. The fact that it is only payable or attributable to his regular attendance does not strip the bonus of that character. As shown by Keith J in his analysis at p.109 lines 11 to 21, the consideration for the attendance bonus is still the work which a worker has done although the rate of pay fluctuated by reference to variable factors, including regular attendance. Mr Sarony’s argument that the bonus was not paid in respect of work done as the latter had been fully rewarded by the basic salary is just a rehash of the argument that was rejected by the Court of Appeal in Wong Ping Kong. Once this is recognized, there is no ground to support the “carrot and stick” distinction drawn by Mr Sarony.       

87.  The next question is whether it is legally permissible for an employer to stipulate that part of the wages would not be payable if an employee takes annual leave within the wage period. Mr Chan relied on Sections 41E and 70 of the Employment Ordinance to contend that this is not permissible.

88.  Before one considers the statutory provisions regarding annual leave and annual leave pay, it is necessary to deal with Section 32 of the Employment Ordinance. That section prohibits deductions from wages otherwise than in accordance with the Ordinance. Sub-section (2)(a) allows deductions for absence from work subject to certain restrictions. Although “absence from work” is translated as “缺勤” in the Chinese version, judging from the context the phrase plainly covers the situation where an employee is absent from work on account of holidays, see the reference to holiday pay in proviso (ii).

89.  Proviso (i) of sub-section (2)(a) stipulates as follows,

“In the case of a contract of employment under which wages are calculated on a basis of time, no such deduction shall exceed a sum proportionate to the period of time during which the employee was absent from work.”

90.  In the context of the present case, one needs to ask whether the wages of the Claimants were calculated on a basis of time. As far as their basic salaries were concerned, those were fixed monthly sums, as such not wages calculated on a basis of time. However, for reasons given, the attendance bonus formed another component of their wages. Was the attendance bonus calculated on a basis of time? It was a fixed sum payable at the end of each month contingent upon full attendance within that month. I do not think it is a sum calculated on a basis of time.

91.  Therefore the Defendant’s condition for payment of attendance bonus is not void by reason of the combined effect of Sections 32 and 70.

92.  I now turn to the statutory provisions for annual leave. Section 41AA provides that every employee who has been in employment under a continuous contract for less than 12 months shall be entitled to pay leave. It is an offence if an employer without reasonable excuse fails to given an employee annual leave, see Section 63(4)(c). An employer is given the power to determine the times at which annual is granted under section 41AA(3) although he is required to consult with his employee. Annual leave could, at the option of an employee, be divided into several periods of leave in accordance with Section 41AA(5)(c). 

93.  Annual leave pay, for worker with fixed salary, shall be a sum equivalent to the wages which the employee would have earned if he had worked every day during the period of annual leave (Section 41C(1)). However, if an employee is paid his ordinary wages in respect of any annual leave, the employee shall not, in addition to such ordinary wages, be entitled to paid annual leave pay, see Section 42.

94.  Section 41E(1) prohibits payment in lieu of annual leave. It is however not absolute. First, for annual leave exceeding 10 days, an employee has an option to receive wages for working on not more than the number of days by which such annual leave exceeds 10, see Section 41E(2). Second, where an employer has not granted annual leave within the period during which such leave should have been granted, an employee has an option to seek compensation or to have paid leave, Section 41AA (8)(a).

95.  It follows from the statutory scheme on annual leave,

(a)	That though an employer has to consult the employee concerned, he has the power to determine the times at which annual leave is granted. In other words, he could grant leave on days which an employee might prefer to work;
(b)	That for leave of 10 days or below, an employee cannot choose to work and receive extra pay instead.

Hence, although the scheme is for the welfare of employees, it is also paternalistic. It can be regarded as a code for enforced rest. Mr Sarony’s submission that annual leave is voluntary on the part of employees is not entirely correct although an employee has the options to choose whether to take leave for more than 10 days and whether to take leave in one go or to split up the same.

96.  The Defendant’s attendance bonus did not prevent a worker from taking annual leave. The statutory right to take annual leave can be exercised by a worker without acting in breach of the contract of employment. To this extent, the present case is different from the situations in Hang Fook Lau Seafood Restaurant v Kwok Sik Yuen [2001] 2 HKC 69 and任銳威 對 灣仔新光酒樓有限公司 [2003] 1 HKLRD 793. However, the scheme had the effect of rendering a worker receiving less if he or she took annual leave in a particular month. In other words, the Claimants suffered a penalty by taking annual leave, viz. a cut in pay for that month to the extent of the attendant bonus. The penalty would increase if a Claimant exercised the option under Section 41AA(5)(c) to split up his or her annual leave into several periods scattered in different months.

97.  One of the legislative intent behind the Employment Ordinance, as recited in the Pre-amble, is to regulate general conditions of employment. Although generally the terms of employment are governed by the contract between employer and employee, the law also recognizes that there are aspects in an employment relationship that could not be solely determined by the bargain struck between the parties. Lord Hoffmann observed in Para.35 of his judgment in Johnson,

“At common law the contract of employment was regarded by the courts as a contract like any other. The parties were free to negotiate whatever terms they liked and no terms would be implied unless they satisfied the strict test of necessity applied to a commercial contract. Freedom of contract meant that the stronger party, usually the employer, was free to impose his terms upon the weaker. But over the last 30 years or so, the nature of the contract of employment has been transformed. It has been recognized that a person’s employment is usually one of the most important things in his or her life. It gives not only a livelihood but an occupation, an identity and a sense of self-esteem. The law has changed to recognize this social reality. Most of the changes have been made by Parliament. …And the common law has adapted itself to the new attitudes, proceeding sometimes by analogy with statutory right.”

(See also the remarks of Lord Steyn as to the development of the law with regard to employment relationship in Johnson at Paras.18 to 20.)

98.  In several aspects regarding employment relationship, legislative prescription overrides freedom of contract. This is the rationale behind Section 70 of the Employment Ordinance. See Para.18 the judgment of Woo JA (as he then was) in任銳威 對 灣仔新光酒樓有限公司 [2003] 1 HKLRD 793. That case was about rest days under Part IV. Yuen J (as she then was) said the following regarding the right protected thereunder in Hang Fook Lau Seafood Restaurant v Kwok Sik Yuen [2001] 2 HKC 69 at p.72,

“The right that Part IV of the Employment Ordinance gives to every employee is the opportunity to rest, so that if his employer requests him to him to work on a rest day, he has the freedom to choose to say ‘No”. If he chooses to say ‘No’, he suffers no loss of rights under his contract …”

99.  Although there are differences between the statutory scheme for rests day and that for annual leave, I think it is equally plain from the statutory scheme as analysed above that the protection conferred under Part VIIIA by way of annual leave is to protect employees from the evils of continuously working without proper opportunity to rest. The legislature obviously considered that it is important that an employer should give an employee proper rest by way of annual leave. This explains the mandatory nature of annual leave, see the observations of A Cheung J in Para. 33 of his judgment in Laing v Lisbeth Enterprises Ltd [2004] 3 HKC 548. Given its paternalistic nature, the statutory scheme strives to achieve through Section 41C that an employee will not suffer any accompanying economic loss for not working during the leave period.

100.  Section 70 provides,

“Any term of a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by this Ordinance shall be void.”

101.  What is the right, benefit or protection that the attendance bonus purports to extinguish or reduce in the present context? As I have said, the Defendant’s scheme of attendance bonus did not bar the Claimants from taking any annual leave. Hence, the right to take annual leave is not extinguished. Mr Chan relied on Section 41E which, subject to some exceptions, prohibits payment in lieu of leave.

102.  I do not think one can equate the attendance bonus with payment in lieu of leave. There is no suggestion before me that the Claimants did not take any annual leave in order to get the attendance bonus. To the contrary, what happened was that the Claimants took annual leaves and for the months in which annual leaves were granted, they were not paid any attendance bonus.

103.  In his Further Skeleton Submission, Mr Chan referred to two other aspects in the statutory provisions for annual leave. The first one is the right under Section 41AA(5)(c) to split the annual leave into two or more parts. The effect of the attendance bonus scheme was that a worker who split his annual leave into two or more leaves taken in different months would suffer a greater loss of attendance bonus than if he were to take his leave on one go.

104.  The second aspect is the calculation of annual leave pay under Section 41C. Is attendance bonus included within the sum equivalent to the wages the employee would have earned if he had worked during his annual leave? I have adverted to the rationale behind the statutory scheme in Paragraph 99 above. Unless the amount of annual leave pay is equivalent to the basic salary of the annual leave period plus the attendance bonus, the employee would suffer an economic loss by reason of the annual leave.

105.  If the Claimants worked during their respective annual leaves, they would have earned not only the basic salary for the leave periods but also the attendance bonus (assuming that they were not disqualified for attendance bonus on account of other reasons). I see no reason why attendance bonus should not be included under the calculation for annual leave pay under Section 41C. Insofar as the contracts between the Claimants and the Defendant provided for the deduction of the attendance bonus from annual leave pay, such a term is void under Section 70 as it purports to extinguish or reduce the right of an employee under Section 41C. This is just another example where legislation regulating employment conditions overrides the bargain struck between the parties in the context of employment relationship.

106.  Mr Sarony argued that the enabling requirement which a worker of the Defendant had to fulfill before he was entitled to attendance bonus was not to take any leave within that particular month. A worker who did not fulfill that requirement simply had no entitlement and therefore the Defendant did not withhold or deduct any wages or any parts of annual leave pay. With respect, that was not the proper approach in considering the quantum of annual leave pay. Section 41C requires a notional exercise be carried out. Even though an employee does not actually work during the annual leave, the law requires the employer to pay him as if he works on those days. This is the rationale behind the decision of the majority of the Court of Appeal in Laing v Lisbeth Enterprises Ltd [2005] 2 HKLRD 150. It was held that annual leave pay should include commission that the employee could have earned if he worked during the annual leave. The employer argued that the employee was not entitled to any commission since he did not actually achieve any sale during the annual leave. In substance, that is an argument similar to that advanced by Mr Sarony. The argument was rejected by the majority in the Court of Appeal.   

107.  I do not think the Defendant can exonerate itself by relying on Section 42. In Laing v Lisbeth Enterprises Ltd [2005] 2 HKLRD 150, the majority of the Court of Appeal held that “ordinary wages” had no other meaning than “wages” as used in the Ordinance and were not restricted to the basic salary component in wages payable to an employee. In the present case, the Defendant did not pay the Claimants their ordinary wages in the months concerned because their attendance bonuses were deducted.

108.  That being the case, the Claimants should be entitled to recover the attendance bonuses as arrears of annual leave pay as opposed to arrears of wages. Given that I had submissions from the parties on the point, I do not think the outcome of the Claimants’ appeal regarding attendance bonus should be hampered by the manner in which the claims were described at the court below. I do not see any prejudice suffered by the Defendant. Insofar as necessary, I grant the Claimants leave to amend their claims accordingly.

109.  The Claimants’ appeal on the attendance bonuses therefore succeeds. I would set aside the award of the Presiding Officer regarding attendance bonus and substituting the same with awards in favour of the Claimants. Parties should be able to work out the figures.

Costs

110.  The Claimants partly succeeds and partly fails in the appeal. At the hearing of the appeal, more time were spent on the appeal on constructive dismissal. However, a substantial portion of costs in relation to the preparation works before the hearing and several interlocutory hearings was occasioned by the Presiding Officer’s ruling on the Defendant’s misconceived application to exclude certain documents from inspection by the Claimants and general case management for the appeal and directions for test appeals. Taking everything into consideration, I make an order nisi that each party bears his/her own costs in the appeal and the court below.