WU KIT MAN v. DRAGONWAY GROUP HOLDINGS LTD

CACV 170/2017

[2018] HKCA 107

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 170 OF 2017

(ON APPEAL FROM HCLA NO 15 OF 2016)

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REASONS FOR JUDGMENT

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Hon Lam VP (giving the Reasons for Judgment of the Court):

1.  This is an appeal from the judgment of Au-Yeung J in HCLA 15 of 2016 on 2 June 2017. By that judgment, the learned judge allowed an appeal from the Labour Tribunal in LBTC 459 of 2016. By an award made on 24 June 2016, the Presiding Officer of the Tribunal found in favour of the Claimant in respect of (amongst other claims) a claim of $350,000 for bonus.

2.  According to the decision of the Presiding Officer, the bonus was payable pursuant to an addendum to the Claimant’s contract of employment with the Respondent.  The contract of employment (in the form of a Letter of Appointment) was made on 12 May 2015.  There was no provision for such bonus in that Letter of Appointment though there is a provision for discretionary bonus payable in January “provided that [the Claimant is] still employed by the [Respondent] on the payment date and that [she has] not tendered [her] resignation before the payment date”.  The amount and payment of that discretionary bonus is at the discretion of the Respondent to be determined by the Respondent’s and her performance (see Clause 5.2).

3.  On 19 October 2015, the Respondent issued an addendum to the Letter of Appointment [“the Addendum”] and it provides as follows:

“ The Company and Wu Kit Man, Athena hereby agree to record certain amendments to the terms and conditions of the previously executed Letter of Appointment dated 12 May 2015 ("Letter of Appointment") which have taken effect from 15 October 2015 (“'Effective Date”):

1.     A cash bonus of HKD1,500,000 will be offered to you as soon as possible after completion of the IPO of the Company or its holding company on or before 31 December 2016.  If the Company or its holding company ceased the listing plan or you leave the Company for whatever reason before 31 December 2016, a cash bonus· of HKD350,000 will be offered to you within 10 days after the cessation or termination and in any event no later than 31 December 2016. If you leave the Company by your own reason, you· will hand over your listing work to the Company.

Save as the above, all other terms and conditions of the Letter of Appointment remain in full force and effect.

Please signify your agreement and confirmation of the above terms and conditions by signing and returning to us this letter no later than 19 October 2015.”

4.  The employment of the Claimant was terminated by the Respondent on 21 December 2015.

5.  The Presiding Officer held that the Addendum was valid and binding and thus made the award in favour of the Claimant.

6.  On appeal, Au-Yeung J reversed the decision of the Presiding Officer on the basis that the Addendum was not supported by consideration.  Though lack of consideration was not specifically raised by the Respondent before the Presiding Officer (there was no legal representation in the Labour Tribunal), the judge took the view that the Presiding Officer should consider the question (as part of his duty to inquire[1] under Section 20(3) of the Labour Tribunal Ordinance) since the Respondent alleged that the director concerned was pressurized into signing Addendum, thereby questioning the legal validity of the same[2].

7.  From that judgment, the Claimant sought leave to appeal on the following grounds on the basis that they involve a point of law of general public importance:

“ 1. 就修訂書是否在法律上有效力而言，原訟法官在2016年6月2日的判案書的第26段指出「修訂文件只是加入兩個給予胡女士現金分紅的條件，而胡女士的僱傭合約所有條款依舊，明顯地，修訂文件僅對胡女士有利，沒有可見的代價」；在第27段更指出「該修訂文件僅為空泛承諾（mere nudum pactum），在法律上沒有效力」。這蘊藏一個錯誤的假設；履行合約原有的責任並不能在任何情況下構成有效的合約代價；亦忽略了考慮被告人是否有從修訂文件得到「實際得益」(practical benefits)(見Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, 11B-15H)。

2. 這衍生以下對公眾有普遍重要性的法律問題：

1） 就修訂僱傭合約而言，若員工純粹履行或承諾履行原有的僱傭合約下既定的責任，這是否不能在任何情況下構成支持更改僱傭合約（以致增加員工所得到的花紅或酬金等）的有效合約代價；抑或，合約代價存在與否視乎情況，而法庭需要考慮的因素包括：

i. 僱主是否從中得到「實際得益」(practical benefits)(見Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, 11B-15H; GEC Plessey Telecommunications [1993] IRLR 383， 第118-119段)；

ii. 僱員是否放棄了原本可以解約的權利（Chong Cheng Lin Courtney v Cathay Pacific Airways Ltd [2011] 1 HKLRD 10，第48-56段）？

8.  Leave to appeal was granted on 13 July 2017.

9.  At the conclusion of the hearing of this appeal, we allowed the appeal and set aside the order of the judge.  We further remitted the question of consideration supporting the Addendum to the Tribunal for retrial and determination.  We also ordered each party to bear her or its own costs in the appeal before us and the costs of the appeal before the judge. 

10.  Prior to addressing the substantive arguments in this appeal, we have to comment on the rather unsatisfactory manner in which the debate on the question of consideration arose in the history of this case. As the judge observed, the parties (without legal representation) did not raise the question of consideration and the Presiding Officer did not deal with that question in his written decision.

11.  Though the question was raised (specifically as a ground of appeal, with leave granted by the judge) in the appeal heard by the judge, notwithstanding that both parties were represented by counsel, the authorities[3] and the principles now relied upon by Mr Wong (for the Claimant) were not drawn to the judge’s attention.  At that stage, the Claimant was represented by another counsel.  At that stage, counsel for the Claimant relied on the change of duties on the part of the Claimant as consideration.  That contention was rejected by the judge at paragraph 29 of the judgment.

12.  The judge had considered if the case should be remitted back to the Tribunal and decided it served no useful purpose: see paragraph 45 of the judgment.  However, she came to that view without considering the points now raised.  Even if the point of law relied upon by Mr Wong is a good one, we are handicapped in the assessment of whether the Respondent had obtained a real benefit or obviated a disbenefit in practice in making the Addendum.  In an appeal from a decision of the Court of First Instance in a Labour Tribunal appeal, it is not the function of the Court of Appeal to undertake the task of evaluation of facts, particularly when we cannot be sure if all the facts have been properly canvassed before the Tribunal had the relevant issues been brought to the attention of the Presiding Officer.

13.  Hence, whilst it was not a course we adopted happily, we were constrained to come to the view that if we agreed with Mr Wong on his point of law, justice demands the case be remitted back to the Tribunal for a retrial on the question of consideration for the Addendum.

14.  Turning now to the point of law relied upon by Mr Wong, counsel submitted that in the context of employment, the non-exercise of an employee of the right to terminate the contract of employment could be good consideration for variation of the terms of employment notwithstanding that it can be said that thereafter the employee was only performing the same obligation under the pre-existing contract.

15.  Counsel derived such proposition from Lee v GEC Plessey Telecommunications [1993] IRLR 383 and Chong Cheng Lin Courtney v Cathay Pacific Airways Ltd [2011] 1 HKLRD 10, which in turn were based upon the development of the law on consideration in Williams v Roffey Brothers & Nicholls (Contractors) Ltd [1991] 1 QB 1.

16.  Whilst Lee v GEC Plessey Telecommunications, supra and Chong Cheng Lin Courtney v Cathay Pacific Airways Ltd, supra, were cases on variation of terms of employment, the former was decided in the context of collective negotiation against a background of industrial dispute, whilst the latter was decided in the context of a variation of standard terms across the board to all the cabin attendants employed by the defendant when there was competition from other airlines offering similar packages.  It was in such special contexts that the courts held that consideration for such variation was provided by the employee refraining from resigning.  The significance of the context is highlighted by Connell J distinguishing Price v Rhondda Urban Council [1923] 2 Ch 372 in Lee v GEC Plessey Telecommunications, supra at [120] to [121].  At [119], Connell J applied the test propounded in Williams v Roffey Brothers & Nicholls (Contractors) Ltd, supra, by asking if the employer has secured a benefit and avoided a detriment.  Similarly, A Cheung J (as he then was) in Chong Cheng Lin Courtney v Cathay Pacific Airways Ltd, supra, at [50] also referred to Williams v Roffey Brothers & Nicholls (Contractors) Ltd, supra, and alluded at [52] to the benefit to the employer (in terms of retaining the services of its cabin attendants in light of competition from other airlines).

17.  The principle of law one can derive from the judgment of Glidewell LJ in Williams v Roffey Brothers & Nicholls (Contractors) Ltd, supra, at p.15H to16A was set out by His Lordship in these propositions,

“ … the present state of the law on this subject can be expressed in the following proposition: (i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and (ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and (iii) B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and (iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and (v) B’s promise is not given as a result of economic duress or fraud on the part of A; then (vi) the benefit to B is capable of being consideration for B’s promise, so that the promisee will be legally binding.”

18.  Russell LJ gave a judgment to the like effect at p.19D to E,

“ A gratuitous promise, pure and simple, remains unenforceable unless given under seal. But where, as in this case, a party undertakes to make a payment because by so doing it will gain an advantage arising out of the continuing relationship with the promisee the new bargain will not fail for want of consideration.”

19.  See also the judgment of Purchas LJ at p.22H and 23 D.

20.  In our view, even in the context of employment (where a continuing relationship is governed by the contract of employment), it is important to bear in mind that the ultimate test for consideration for the variation of the terms of employment is still one of real benefit. 

21.  Hence, whilst we can accept in many instances one can take it as a starting point that an employee may give consideration for a variation of terms of employment in his favour by continuing with the employment, the court must still have regard to the overall circumstances of the case to see if it is justified in drawing the conclusion that the continuance in employment did provide a real benefit to the employer which can provide consideration for the variation.

22.  Unfortunately, in the appeal before the judge, counsel failed to assist the court properly by referring Her Ladyship to this line of cases.  Had that been done, the judge could well have reached a different conclusion if there was sufficient exploration of the facts relevant to the issue of consideration by the Tribunal.

23.  On the facts of the present case, there are matters which should be more thoroughly investigated.  The Addendum was executed in October 2015 and the Claimant’s employment was terminated in December 2015.  According to the witness for the Respondent, the work for procuring the listing of the Respondent had run into difficulties in October 2015 and it was found out that the Claimant was not familiar with listing work.  She also said the company was dissatisfied with the job performance of the Claimant.  Against such background, the question of consideration is not that straightforward as in those cases relied upon by Mr Wong.

24.  At the same time, we cannot accept the submission of Mr Choy on behalf of the Respondent that the judge had effectively made a finding that no real benefit could have been enured to the Respondent at paragraphs 27 to 29 of the judgment.  By reason of the lack of citation of the relevant authorities, the judge did not focus on the issue. Nor do we accept his submission that the Addendum clearly lacks commercial sense.  It very much depends on the state of affairs as between the Claimant and the Respondent (as opposed to the situation between Ms Lin and Mr Hui) as at the date when the Addendum was executed, which the Presiding Officer had not examined closely. 

25.  For these reasons, we concluded that the matter should be remitted to the Labour Tribunal for retrial on the question of consideration.

26.  By way of postscript, we add that the approach in Williams v Roffey Brothers & Nicholls (Contractors) Ltd, supra, was recently applied by the English Court of Appeal in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2017] QB 604.  The case went further to the UK Supreme Court and that appeal was heard on 1 February 2018.  The judgment of the Supreme Court is pending.  At the retrial, the Presiding Officer may have to find out if the judgment of the Supreme Court has been delivered and to what extent it impacts upon the analysis above.

27.  Lastly, we wish to revert back to the way in which the question of consideration became an issue in this case.  Since the judge had given leave for the question to be raised on appeal, and there was no challenge to the same in this appeal, we are not required to examine the judge’s grant of leave.  However, we should not be taken as accepting that the duty of the Presiding Officer to investigate obliged him to inquire into the question of consideration even when it is not apparent on the materials produced by the parties that consideration is an issue.  As mentioned above, the lack of consideration was not raised by the Respondent.

28.  In James Manuel Ho v Grand Pacific Vacation (Hong Kong) Ltd HCSA 5 of 2004, 29 July 2005,Chung J, after examining a series of cases on the duty of a Presiding Officer to investigate, summed up the relevant principles as follows at [14]:

“ The extent to which the duty imposed on the Tribunal … to inquire must depend on the individual circumstances of each case. However, the following legal principles can be gathered from the relevant judgments:-

(a) the duty to inquire is limited to a duty to inquire into any matter “which it may consider relevant to a claim”;

(b) the duty is not absolute;

(c) not every failure to inquire a relevant matter gives rise to a valid ground of appeal. The failure must be of such a nature that it gives rise to injustice in that a fair and proper determination cannot be attained;

(d) “matter … relevant to a claim” can cover matters of various degrees of relevance to a claim. The Tribunal has no duty to inquire into all matters of relevance irrespective of whether they have a reasonable basis;

(e) the manner of investigation is a matter of discretion for the Tribunal dependent on the facts of the case before it. The appellate court should not interfere with that discretion merely because it would have exercised it in a different manner. Regard can be taken of matters such as the issues in dispute, the incontrovertible evidence before the Tribunal and materials placed before the Tribunal by the parties prior to the trial before the Tribunal;

(f) on the other hand, the duty to inquire does not mean the Tribunal should take over the role of an advocate for a litigant. The Tribunal must remain neutral and impartial. Thus, litigants must still be allowed to cross-examine witnesses for the other side, and litigants cannot be compelled to testify against their wishes. But the Tribunal has a duty to invite litigants to consider giving evidence when it is apparent he could give evidence on important matters in issue;

(g) the duty to inquire can include the Tribunal inviting the parties to comment on matters, or, if necessary, directing them to produce evidence or documents, relating to matters which the Tribunal discerns to be important.”

29.  With respect, we agree with this summary.

30.  However, since the lack of consideration had become an issue, given the limited jurisdiction of this court, it would not be right for us to retract from that position.  Otherwise, the Respondent could legitimately harbour a sense of grievance.  Hence, the proper course is the one we adopted.