DIAS SANDRA MARY ELIZABETH v. CATHAY PACIFIC AIRWAYS LTD

HCA2372/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2372 OF 2002

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R U L I N G

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1. This is an employment case.  The plaintiff, Ms Dias, was employed by the defendant, Cathay, as a flight attendant.  Cathay terminated her contract by payment in lieu of notice.  She now claims primarily for damages and/or a declaration of right in respect of retirement travel benefits (“RTB”) which she says are provided under her contract of employment, but denied to her following her termination.  There are other claims but I need not go into them for the purposes of this ruling.

2. Cathay now applies to re-amend its Amended Defence.  It seeks to add to existing averments of misconduct new averments relating to the alleged theft by Ms Dias of a bottle of champagne belonging to Cathay.  It also seeks leave to file and serve the witness statement of one Tang Yoke May (“Ms Tang”). 

3. Ms Dias takes objection to these amendments, and to the filing of the witness statement.  In brief, she says that this is a new case, which should have been pleaded much earlier, and was in effect abandoned.  She will be prejudiced if Cathay is allowed to advance it now.  Therefore the court should, in its discretion, refuse to allow the amendments.

Background

4. Ms Dias was employed as a flight attendant by Cathay from 12 November 1990 to 27 February 2001.  Her contract was terminated by payment of one month’s wages in lieu of notice following an inquiry into her conduct during flight duty between 15 and 18 February 2001, between Hong Kong and Mumbai. 

5. She instituted proceedings in the Labour Tribunal on 11 February 2002, and on 3 June 2002 the proceedings were transferred to the High Court.  The pleadings now before this court consist of an Amended Statement of Claim dated 5 July 2003, an Amended Defence dated 26 July 2003, Further and Better Particulars of the Amended Defence and an Amended Reply dated 25 November 2003. 

The existing pleadings

6. Both parties’ cases have changed since the proceedings began.  Ms Dias originally claimed that the terms of her contract of employment were set out in a Staff Benefits Handbook which provided for RTB on reaching retirement age, which in her case is 40 years.  In breach of the terms of her employment, Cathay informed her that she would not be entitled to such travel benefits.  Even if her employment was lawfully terminated, she was still entitled to RTB from age 40 onwards.  At that stage, Cathay’s defence was that the terms of the Handbook were not terms of the employment and further that as a matter of construction, Ms Dias was not entitled to RTB because she had not retired but had been dismissed. 

7. In the Amended Statement of Claim Ms Dias pleaded that her terms of employment were contained in Cathay’s conditions of cabin crew (“COS”) as well as the Handbook earlier pleaded.  There was also a Disciplinary and Grievance Policy (“DGP”) which was part of the terms of her employment.  Her employment was not terminated in accordance with the DGP and Cathay was in breach of contract in failing to follow it. 

8. In its Amended Defence, Cathay maintained that Ms Dias’ employment was terminated and that she did not retire, and that in the premises, any terms of employment relating to retirement were irrelevant.  In addition, it pleaded that the COS gave it the right to dismiss her without notice or benefit for neglect or failure to perform her duties to its satisfaction.  As to the DGP, Cathay pleaded that its terms were not terms of Ms Dias’ employment, but if they were, it provided that, in the event of termination, in circumstances involving misconduct amounting to a serious breach of the terms of employment, or the repetition of misconduct of a less serious nature, privileges such as RTB could be removed at Cathay’s discretion.  In the alternative, it pleaded that if the DGP applied, it was entitled to terminate Ms Dias’ employment as a consequence of her misconduct. 

9. Such misconduct was, in the Amended Defence, particularised as :

(a)      poor performance in the exercise of her duty;

(b)     failure to report for duty and reporting late for duty;

(c)     failure to comply with the Defendant’s internal procedures;

(d)     dishonesty; and

(e)      failure to comply with overseas customs regulations. 

10. The relevant provisions of the DGP, or at any rate those assumed to be relevant, for I am told they come from an edition published after the date of termination, are as follows :

“8.   Termination of Employment

8.1  A Cabin Crew member’s employment may be terminated, with notice or payment in lieu of notice, in the event of a Cabin Crew member engaging in misconduct which amounts to a serious breach of the terms of service or for the repetition of misconduct of a less serious nature.

…

8.6  In the event of a employment being terminated in such circumstances, privileges such as retiree travel will be removed at the company’s sole discretion.”

11. Non-exclusive examples of misconduct are given at paragraph 8.2 of the DGP.  These include breach of trust or confidence and misconduct prejudicial or likely to cause harm to the reputation of the Company.  Paragraph 9 makes provision for misconduct which gives the Company the right to summary dismissal.  The non-exclusive examples given include fraud or dishonesty such as taking company property. 

12. Ms Dias requested further and better particulars of misconduct and these were provided on 18 December 2003.  The particulars in Answers (a) to (d) do not concern me here, because they are repeated in the proposed amended pleadings and no objection is taken to them.

13. In respect of dishonesty, it was alleged in Answer (e)(i) that on or before 24 March 1998 she forged the signature of a colleague on an application form for mutual exchange of flight duties and submitted the false application form to Cathay as a valid and genuine application.  In other words, what is pleaded is forgery and uttering. 

14. In respect of failure to comply with overseas customs regulations it was alleged in Answer (e)(ii) that on 15 February 2001, while on duty and having arrived in Mumbai on flight CX750 Ms Dias failed to comply with the regulations in that she was carrying a mobile telephone and a bottle of wine in respect of which she did not or did not properly declare. 

The disputed amendments

15. These appear in paragraph (d)(ii) of the particulars of the proposed paragraph 14G, which alleges misconduct.  The most important one reads :

“(d)    Dishonesty and other serious misconduct

(ii)   Unauthorised removal of Defendant’s property from its aircraft

On or about 15 February 2001, during an inspection undertaken by the Customs Department at … Mumbai, and subsequently upon a search of her bag at the crew hotel on the same day, the Plaintiff was found to have been carrying in her luggage a bottle of champagne wine named “Krug” that had been taken from the Defendant’s aircraft without authorisation from the Defendant.”

16. Sub-paragraphs (i) and (iii) plead respectively the forgery and uttering, and the failure to comply with customs regulations already pleaded and no objection is taken to them. 

17. Sub-paragraphs (iv) to (v) plead dereliction of duty, mainly on the subsequent return flight to Hong Kong, when it is said that Ms Dias attempted to persuade Ms Tang, who was the Inflight Services Manager, i.e. her superior officer, not to report the incidents at Mumbai, and further she attempted to persuade other crew members to assist her in this attempt.  No objection is taken to these pleadings insofar as they relate to the alleged breach of customs regulations, but counsel agree that if sub-paragraph (ii) is not allowed as part of the amendments, references to it in the subsequent sub-paragraphs will also have to be edited out. 

18. Sub-paragraph (vi) relates to an alleged admission by Ms Dias to Ms Tang that the bottle of wine not declared to customs was the bottle of champagne, and a later admission that she had stolen the champagne; an interview and a written statement in which Ms Dias denied taking anything, or having any alcohol in her bag when she passed through customs; and a further interview in which she admitted that she was carrying a bottle of wine when she passed through customs.  In the event that I disallow sub-paragraph (ii), it is agreed that of sub-paragraph (vi) should be edited to leave in averments which relate to the customs matter but there is some dispute as to what that entails. 

19. In effect, therefore, Cathay seeks to add averments of theft and related matters such as admissions, denials and attempts to persuade others not to report it, to the existing averments of misconduct relating to the incident at Mumbai on 15 February 2001.  It also seeks to file the statement of May Tang in support of these allegations. 

Evidence of the Mumbai incident

20. Cathay has filed witness statements of Tsang Kin Chung, its Cabin Crew Line Manager, and Zara Chu Ahmad Mustaffa, a Performance Development Executive, both of whom were involved in interviews with Ms Dias in February 2001 after the Mumbai incident and before the termination of her employment. 

21. There is no direct evidence on Cathay’s side of what happened at Mumbai and on the return flight.  Mr Tsang collected statements of Ms Dias herself and four other cabin crew members, namely Ms Chuah, Ms Lakdawalla, Ms Abreo and Ms Nazareth and flight reports submitted by Ms Tang.  The substance what these ladies say is that the customs officer gave a verbal warning to Ms Dias for declaring the wrong mobile phone and not declaring a dutiable item which the officer referred to as a bottle.  Ms Dias, whose home was in Mumbai, got off the crew bus to go home and the others went to their hotel.  She mistakenly took Ms Lakdawalla’s bag and left her own on the bus.  At the hotel, Ms Tang, in the presence of the others, opened the bag to find out whose it was.  They found inside it a bottle; Ms Chuah said it was Krug champagne and Ms Tang said it was Krug champagne in a Cathay shopping bag.  Ms Tang telephoned Ms Dias who admitted that she had taken the champagne for her friends in Mumbai and asked Ms Tang not to report it.  On the return flight to Hong Kong, Ms Dias spent most of her time trying to persuade Ms Tang and the others not to report the incident; meanwhile, others had to do her work for her.  In Hong Kong, Ms Dias telephoned Ms Nazareth asking if it was necessary to report that she had alcohol in her bag; what she had was home-made medicine.  She further telephoned Ms Lakdawalla and also told her that the bottle in the bag was home-made medicine. 

22. Mr Tsang says that in her own statement Ms Dias blamed Ms Tang for causing the customs officer to spot-check the crew, because she did not hand over the customs declaration forms when she should have done.  There was nothing dutiable in the bag but the officer made a rude comment about the mobile phone.  There was a bottle but it was home-made medicine.  Ms Tang was trying to take revenge for an earlier incident for which she blamed Ms Dias, and it was hinted that Ms Chuah agreed to corroborate the story of the champagne in order for Ms Tang to cover up misconduct on Ms Chuah’s part. 

23. In her own witness statement, Ms Dias says that the customs officer at Mumbai was irritated because most of the flight crew had gone through customs without handing over their declaration forms as they were supposed to.  So their bags were checked.  She was found to have written down her mobile phone model number as 8210 instead of 3210.  She apologised and he let her through without paying duty.  There were no dutiable items in the bag.  If there had been any, it would have been confiscated because the Indian customs authorities are strict.  She did indeed take home the wrong bag.  Later, she heard of the allegation that a bottle of champagne had been found in her own bag.  Ms Tang reported her for it, and she was suspended from duty.  But she had not taken any champagne.  She had in her bag a dark plastic water bottle containing medicinal water for stomach trouble.  She does not say anything about what happened on the return flight or later. 

24. In a supplemental witness statement Mr Tsang says, inter alia, that he and his colleagues had no doubt that Ms Dias had stolen the champagne from the aircraft, because Cathay serves Krug champagne, because when challenged Ms Tang admitted it, because Ms Tang’s report was supported by the other crew members and none of them had any reason to make false reports, and because Ms Dias’ subsequent denials contradicted her earlier admission.  Mr Carolan, who appears for Ms Dias, says that this is scandalous, and he will apply to have it struck out at trial under Order 41, rule 6.  I do not quite know why; the rule deals with scandalous or irrelevant matter in an affidavit, not a statement.  But no doubt, if there is no pleading of theft, any evidence of theft or admission of theft will be irrelevant; and the witness’s belief will also be irrelevant. 

25. I do not think it is necessary for the purposes of this ruling to go into what the other flight attendants wrote, or into the details of the interviews.  But it is common ground that the allegation of taking a bottle of champagne was made at the interviews.  Mr Tsang says that she first denied it, but later admitted carrying a bottle of white wine which was detected by the Bombay customs through X-ray.  In fact both he and Ms Chu produce records they say they made at the interviews, and from these it appears that Ms Dias first admitted carrying her own bottle of wine but not taking champagne, but later denied everything.  In her statement, Ms Dias says that, at the first interview, Cathay staff tried to get her to co-operate by admitting having taken the champagne.  She was told to write a letter stating her position, which she did.  At the second interview, when she did not co-operate, they told her that she was terminated. 

26. This letter in fact went missing for some time in Cathay’s offices but it has now come to light.  It contains no admission, and an explanation that there was a bottle of home-made medicine in the bag.

27. It appears that Ms Dias applied, through her trade union to the Indian customs authority and got a confirmation from it that nothing untoward had happened; but this is useless because, for whatever reason, the date given by the union to the authority, and mentioned in the authority’s reply is 26 February and not 15 February 2001. 

Evidence on the application to amend

28. In her affidavit in opposition to the application to amend, Ms Dias says that because of the lateness of the proposed amendments, she is prejudiced in her ability to refute them.  She refers to the fact that when her solicitors requested particulars of the original paragraph 18 of Cathay’s defence which pleaded that on termination an employee’s RTB were forfeit, Cathay’s solicitors replied that there was no need for particulars because Ms Dias’ conduct of her duties was not an issue which was relevant for the purposes of the trial of the action.  Only after she herself amended was any kind of misconduct pleaded. 

29. She says that cannot now contact other flight attendants, in particular Ms Lakdawalla and Ms Nazareth, who she believes would be able to give evidence supporting her version of events.  Nor can she contact other crew members, namely Ms Chuah and Ms Abreo, who may be able to give evidence which would assist her.  She believed that there was no need to pursue a correct report from the Indian customs authority because, in the beginning, Cathay was not going to rely on her misconduct; and now that it has become necessary because of the new allegations that also is too late.  If she had known in the beginning that Cathay would rely on theft she would have sought to get statements from the witnesses and a correct report from the Indian customs.

30. Cathay’s solicitor, Ms Iu, has filed an affidavit in reply in which she produces all the statements of the flight crew members, which she says were earlier discovered.  She refers to the fact that Ms Dias in her statement refutes the allegations against her, including that of theft of champagne.  She says that Ms Dias is not prejudiced by being unable to contact other witnesses, and has in any event never asked Cathay for their details. 

31. I have not seen any affidavit in support of the application to amend; only Ms Iu’s reply to Ms Dias’ affidavit in opposition.  What is conspicuously lacking is any evidence from Cathay as to why, having elected not to plead the theft allegations as part of the misconduct, it now wishes to plead them at this stage.

Principles

32. Generally amendment will be allowed if it can be made without injustice to the other side.  There is no injustice if the other side can be compensated by costs.  The general principles are set out at paragraph 20/8/6, and the principles on late amendment at paragraph 20/8/10 of the Hong Kong Civil Procedure 2004.  The proposed amendments are late; they come two years after the Defence was amended in July 2003. 

33. Leave to amend late is readily granted, on payment of costs, unless the opponent will be placed in a worse position than he would have been if the amended pleading had been served in the first instance.  But there may be difficulty if there is ground for believing that the application is not made in good faith.  Thus, if either party seeks to amend by introducing for the first time allegations of fraud, misrepresentation or other such serious allegation, the court will ask why this was not pleaded originally, and may require to be satisfied as to the truth and substantiality of the proposed amendment.  See Lawrance v. Norreys (1890) 39 Ch D 213.

34. Mr Carolan, who appears for Ms Dias, says that in effect the case on theft has been abandoned.  He says that the circumstances are similar, by analogy, to those in the case of Cellular Clothing Co. Ltd v. G White & Co. Ltd [1952] 70 RPC 2.  In that case, the plaintiff claimed relief for infringement of trademark in its writ, but in its statement of claim pleaded passing off but not infringement.  It was held to have abandoned the infringement claim, and refused leave to amend so as to bring it in later.  Mr McLeish, who appears for Cathay, has referred me to the case of Woomera Co. Ltd & Anor v. Provident Centre Development Ltd [1985] HKLR 263 (CA) in which the Court of Appeal, having considered Cellular Clothing, held that it could not interfere with the discretion of the judge below, who had allowed amendments which pleaded a claim earlier abandoned. 

35. References have also been made to cases involving the question of waiver by an employer who chooses to terminate an employee’s contract by notice, knowing that he has grounds for summary dismissal.  In fact, Cathay wishes to include an amendment to the effect that it could have dismissed Ms Dias without notice, but that amendment relates to Ms Dias case for late payment of salary in lieu of notice, and not to the RTB claim.  These cases were not referred to in the skeleton arguments and I do not think they assist much on the pleading point concerned here.  Really all that the cases above cited tell us is that amendment is a matter of discretion.  Harman J exercised it one way, and Liu J exercised it the other way.  The discretion is wide; see the comments of Lord Griffiths in Ketteman v. Hansel Properties Ltd [1987] AC 187 at 220 :

“Whether an amendment should be granted is a matter for the discretion of the trial judge and he should be guided in the exercise of the discretion by his assessment of where justice lies.  Many and diverse factors will bear upon the exercise of this discretion.  I do not think it possible to enumerate them all or wise to attempt to do so.  But justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes, and the legitimate expectation that the trial will determine the issues one way or the other.”

36. That case was one in which the amendments came very late indeed; but these general comments apply in every case.

37. What is in issue is whether the amendments would subject Ms Dias to injustice which could not be compensated by costs. 

Injustice

38. The question is whether, if the amendment is allowed, Ms Dias will be worse off than if the new matter had been pleaded in the Amended Defence in July 2003?

39. The amendments do not represent Cathay’s primary case.  Cathay says that Ms Dias is not entitled to RTB in any event; and further that the DGP do not apply.  Only if it be found that the first limb of the defence is wrong, and that the DGP do apply will it be necessary for Cathay to prove “misconduct which amounts to a serious breach of the terms of service or for the repetition of misconduct of a less serious nature”. 

40. There is no dispute about the pleadings of repetitive breach although I have to wonder whether the matters complained of are particularly serious.  But that is a matter for trial.  As to serious misconduct, what we have is a three-year-old instance of dishonesty (the forgery) and the Mumbai incident, which is currently pleaded as only a customs violation. 

41. Ms Dias explains the alleged forgery thus.  There was a practice for crew members to agree to swap flights.  Cathay required both their signatures on a swap form.  Because it was difficult for them to meet in order for both of them to sign the form, crew solved the problem by one member giving her ICAO number to the other and telling her to put it on the form and sign the form for her.  If that is right, of course, there was no dishonesty.  That is a matter for trial but the incident happened in March 1998 and one wonders why, if Cathay really saw this as an offence of dishonesty, it took no action at that time.

42. As to the customs violation, again one wonders how seriously it can be regarded if the customs officer took no action in respect of the mobile phone or the wine, if indeed there was wine in the bag.  Writing down a wrong serial number is no great matter.  No doubt Ms Dias would know that there was no duty free allowance for liquor — that appears in a crew information form appended to one of Ms Tang’s reports — but equally that fact would mean that if she had liquor, it would most probably have been confiscated.  If it was not confiscated, that would imply that the matter was so trifling that the customs officer had the discretion to enforce the rule or not.

43. In my view, there is not much substance in the averments of “misconduct which amounts to a serious breach of the terms of service”.  If the averments are proved it will be open to the court to say that Cathay itself cannot have seen the first incident as serious, and should not have seen the second as serious if the Indian customs did not.  Now, however, Cathay seeks to plead theft, even though that term is not used.  Theft is invariably a serious matter and theft by an employee is aggravated by the element of breach of trust.  Leaving aside any question of how good Cathay’s case on theft is, if Cathay can bring it home it has a much stronger case on misconduct than before. 

44. I do not think Ms Dias will be much worse off in finding evidence to defend the case against her, than if theft had been averred two years ago.  She would have had problems then in getting statements out of the other cabin crew (which she never tried to do anyway) or information out of the Indian customs.  However, she will inevitably be somewhat worse off than she would have been two years ago when it comes to finding evidence, simply because of the further delay; and she will certainly be worse off in that the case of misconduct will, if theft is proved, be that much stronger. 

45. The lack of any real explanation for why Cathay, having elected not to rely on theft either at the outset, when it was apparently not relying on misconduct at all, or when it first amended its Defence, should want to bring it in now is also a relevant factor.  Mr McLeish says that it is necessary to bring the pleadings into line with the evidence.  It is right that Mr Tsang’s evidence deals with theft, albeit as hearsay.  It is also true that Ms Dias has known all along that Cathay was saying that she had stolen its champagne.  But another possible explanation is that Cathay has taken a hard look at its case on serious misconduct and decided that it needs some fortification.  That may be so.  Nevertheless Cathay has up to now, to use the words of Harman J in Cellular Clothing, announced to the world and the plaintiff that the only particulars of misconduct on which it was going to rely did not include theft.  It has not explained why, two years after it first pleaded misconduct on one basis, it wants to plead the misconduct on a more serious basis which was well known to it at the time.

46. I realise that it will be difficult, if not impossible, to exclude evidence tending to show that Ms Dias stole the champagne.  However, if theft is not pleaded, it cannot be relied on as misconduct and the trial judge will not be required to make a finding as to whether theft was committed.

47. It seems to me that in the circumstances the disputed amendments cannot be made without injustice to Ms Dias.  Accordingly, I will refuse the disputed amendments. 

The statement of Ms Tang

48. Mr Carolan says that that this should be excluded because absent a pleaded allegation of theft, none of her proposed statement would be relevant, and thereby admissible.  Mr McLeish says that it goes far beyond theft.

49. The statement contains some not very helpful evidence of what happened at the Indian customs.  Ms Tang says she heard the officer shouting at Ms Dias about having done two things she was not supposed to do; but that is as far as it goes.  This goes to the averments of misconduct relating to the customs declaration.  Then we have evidence about the finding of the Krug champagne in a Cathay shopping bag, inside Ms Dias’ luggage and a telephone conversation.  This goes to theft.  After that she says that on the flight to Hong Kong, Ms Dias continually pestered her not to report the theft; so that goes to theft.  There is also some hearsay of what Ms Lakdawalla and Captain Beselt said, but again the thrust of this is that it concerned attempts by Ms Dias to avoid being reported for theft.  Finally there is evidence of an earlier incident which goes to rebutting what Ms Dias says about a false allegation motivated by a grudge.

50. Ms Tang wishes to confirm and adopt her earlier reports but again, these go primarily to theft; there is only a minor mention of what the customs officer said.

51. As I have indicated, it will be difficult, if not impossible, to exclude evidence of theft.  But this statement is primarily about theft and the evidence will be irrelevant in the absence of the pleading of theft.  One must start somewhere.  It therefore seems to me that leave to file the statement must be refused.

Disposition

52. I will, therefore, order that Cathay have leave to amend the Amended Defence in the manner as set forth in green ink in the copy attached to the Summons, subject to the following amendments to the Particulars in paragraph 14G thereof :

(1)     sub-paragraph (d)(ii) be deleted;

(2)     sub-paragraphs (d)(iv), (v) and (vi) be amended by deleting “subparagraphs (d)(ii) and/or (d)(iii)” where they appear and substituting therefor “sub-paragraph (d)(iii)”;

(3)     In sub-paragraph (d)(vi) :

          Item A be amended by deleting “as referred to in sub-paragraph (d)(ii) above”;

          Item B be deleted entirely;

          Item C be amended by deleting “taking anything from the Defendant’s aircraft without authority or”.

53. I dismiss paragraph 2 of the Summons and allow paragraph 3 with the necessary amendment to remove the reference to the excluded witness statement. 

54. As to costs, counsel have asked to be heard in the event that I rule in the plaintiff’s favour, as I have done.  I accordingly reserve costs to a further hearing on a date to be fixed.